EconPapers    
Economics at your fingertips  
 

Federal Reserve Structure and the Production of Monetary Policy Ideas

Michael Bordo and Edward S. Prescott

No 31915, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We evaluate the decentralized structure of the Federal Reserve System as a mechanism for generating and processing new ideas on monetary policy over the 1960 - 2000 period. We document the introduction of monetarism, rational expectations, credibility, transparency, and other monetary policy ideas by Reserve Banks into the Federal Reserve System. We argue that the Reserve Banks were willing to support and develop new ideas due to internal reforms to the FOMC that Chairman William McChesney Martin implemented in the 1950s and the increased ties with academia that developed in this period. Furthermore, the Reserve Banks were able to succeed at this because of their private-public governance structure. We illustrate this with a time-consistency model in which a decentralized organization is better at producing new ideas than a centralized one. We argue that this role of the Reserve Banks is an important benefit of the Federal Reserve’s decentralized structure by allowing for more competition in formulating ideas and by reducing groupthink.

JEL-codes: B0 E58 G28 H1 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-ban, nep-his and nep-mon
Note: ME
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w31915.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Federal Reserve Structure and the Production of Monetary Policy Ideas (2023) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:31915

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31915
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-19
Handle: RePEc:nbr:nberwo:31915