The Adjustment of Expectations to a Change in Regime: a Study of the Founding of the Federal Reserve

44 Pages Posted: 15 Mar 2007

See all articles by N. Gregory Mankiw

N. Gregory Mankiw

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Jeffrey A. Miron

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

David N. Weil

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: 1987

Abstract

The founding of the Federal Reserve System in 1914 led to a substantial change in the behavior of nominal interest rates. We examine the timing of this change and the speed with which it was effected. We then use data on the term structure of interest rates to determine how expectations responded. Our results indicate that the change in policy regime was rapid and that individuals quickly understood the new environment they were facing.

Suggested Citation

Mankiw, N. Gregory and Miron, Jeffrey A. and Weil, David Nathan, The Adjustment of Expectations to a Change in Regime: a Study of the Founding of the Federal Reserve (1987). NBER Working Paper No. w2124. Available at SSRN: https://ssrn.com/abstract=971610

N. Gregory Mankiw (Contact Author)

Harvard University - Department of Economics ( email )

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Jeffrey A. Miron

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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David Nathan Weil

Brown University - Department of Economics ( email )

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