An Episodic History of Modern Fed Independence

Abstract

We supplement the existing empirical literature on Fed independence with a contextualized episodic history to corroborate the empirical literature and inform future studies. We examine the postwar Fed to focus on the ability of the Fed to forge a monetary path independent of political influence in modern times. We find that the Fed regularly accommodates debt, succumbs to political pressures, and follows bureaucratic tendencies, compromising the Fed’s operational independence.

Keywords: Federal Reserve, central bank independence, monetary policy

JEL Classification: E50