Has the Fed Been a Failure?
84 Pages Posted: 9 Mar 2013
Date Written: December 15, 2010
As the one-hundredth anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation‘s experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed‘s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed‘s establishment. (2) While the Fed‘s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.
Keywords: U.S. financial policy, American economic policy, Federal Reserve Bank, Federal Reserve System, 2008 financial crisis, 2008 economic crisis, United States monetary policy, federal reserve, inflation, expansionary monetary policy
JEL Classification: E30, E42, E52, E58
Suggested Citation: Suggested Citation