The Transformation of Economic Analysis at the Federal Reserve During the 1960s

35 Pages Posted: 7 Nov 2018

See all articles by Juan Acosta

Juan Acosta

University of Lille I, Faculty of Economic and Social Sciences, Department of Economics and Management

Beatrice Cherrier

CNRS; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); University of Paris-Saclay - Ecole Polytechnique

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Date Written: October 1, 2018

Abstract

In this paper, we build on data on Fed officials, oral history repositories and hitherto under-researched archival sources to unpack the torturous path toward crafting an institutional and intellectual space for postwar economic analysis within the Fed. We show that growing attention to new macroeconomic research was a reaction to both mounting external criticisms against the Fed’s decision-making process and a process internal to the discipline whereby institutionalism was displaced by neoclassical theory and econometrics. We argue that the rise of the number of PhD economists working at the Fed is a symptom rather than a cause of this transformation.

Key to our story are a handful of economists from the Board of Governor’s Division of Research and Statistics (DRS) who paradoxically did not always held a PhD, but envisioned their role as going beyond mere data accumulation and got involved into large-scale macroeconometric model building. We conclude that the divide between PhD and non-PhD economists may not be fully relevant to understand both the shift in the type of economics practiced at the Fed and the uses of this knowledge in the decision making-process. Equally important was the rift between different styles of economic analysis.

Keywords: History of Macroeconomics, Macroeconometrics, History of Central Banking, Federal Reserve Board

JEL Classification: B22, B23, B26, E02, E58

Suggested Citation

Acosta, Juan and Cherrier, Beatrice, The Transformation of Economic Analysis at the Federal Reserve During the 1960s (October 1, 2018). Available at SSRN: https://ssrn.com/abstract=3258049 or http://dx.doi.org/10.2139/ssrn.3258049

Juan Acosta (Contact Author)

University of Lille I, Faculty of Economic and Social Sciences, Department of Economics and Management ( email )

Villeneuve D'Ascq Cedex, 59655
France

Beatrice Cherrier

CNRS ( email )

3, rue Michel-Ange
Paris, 75794
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

University of Paris-Saclay - Ecole Polytechnique ( email )

55 Avenue de Paris
Versailles, 78000
France

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