Towards an Administrative Law of Central Banking

89 Pages Posted: 20 Apr 2021 Last revised: 18 May 2021

See all articles by Peter Conti-Brown

Peter Conti-Brown

University of Pennsylvania - The Wharton School; Brookings Institution

Yair Listokin

Yale Law School

Nicholas R. Parrillo

Yale University - Law School

Date Written: January 1, 2021

Abstract

A world in turmoil caused by COVID-19 has revealed again what has long been true: the Federal Reserve is arguably the most powerful administrative agency in government, but neither administrative-law scholars nor the Fed itself treat it that way. In this Article, we present the first effort to map the contours of what administrative law should mean for the Fed, with particular attention to the processes the Fed should follow in determining and announcing legal interpretations and major policy changes. First, we synthesize literature from administrative law and social science to show the advantages that an agency like the Fed can glean from greater openness and transparency in its interpretations of law and in its long-term policymaking processes. These advantages fall into two categories: (1) sending more credible signals of future action and thereby shaping the behavior of regulated parties and other constituents, and (2) increasing the diversity of incoming information on which to base decisions, thereby improving their factual and predictive accuracy. Second, we apply this framework to two key areas—monetary policy and emergency lending—to show how the Fed can improve its policy signaling and input diversity in the areas of its authority that are most expansive. The result is a positive account of what the Fed already does as an administrative agency and a normative account of what it should do in order to preserve necessary policy flexibility without sacrificing the public demands for policy clarity and rigor.

Keywords: central banking, administrative law, financial regulation

JEL Classification: E00, E02, K20, K23

Suggested Citation

Conti-Brown, Peter and Listokin, Yair and Parrillo, Nicholas R., Towards an Administrative Law of Central Banking (January 1, 2021). Yale Journal on Regulation, Vol. 38, No. 1, 2021, Available at SSRN: https://ssrn.com/abstract=3828047

Peter Conti-Brown (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Yair Listokin

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-436-2567 (Phone)

Nicholas R. Parrillo

Yale University - Law School ( email )

127 Wall St.
New Haven, CT 06511
United States

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