Federal Reserve Policy in the Great Recession

9 Pages Posted: 30 Mar 2013

See all articles by Allan H. Meltzer

Allan H. Meltzer

Carnegie Mellon University - David A. Tepper School of Business

Date Written: June 15, 2012

Abstract

Overresponse to short-run events and neglect of longer-term consequences of its actions is one of the main errors that the Federal Reserve makes repeatedly. The current recession offers many examples of actions that some characterize as bold and innovative. I regard many of these actions as inappropriate for an allegedly independent central bank because they involve credit allocation, fill the Fed’s portfolio with an unprecedented volume of long-term assets, evade or neglect the dual mandate, distort the credit markets, and initiate other actions that are not the responsibility of a central bank. We can improve outcomes by ending unlimited discretion and insisting on great discipline and accountability for Federal Reserve actions.

Keywords: global financial crisis, U.S. monetary policy, U.S. financial policy, keynesian economics, American central bank, great recession, economic policy

JEL Classification: E50, E52, E58, G01, H12

Suggested Citation

Meltzer, Allan H., Federal Reserve Policy in the Great Recession (June 15, 2012). Cato Journal, Vol. 32, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2240981

Allan H. Meltzer (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-2282 (Phone)
412-268-7057 (Fax)

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