Financial Panics, the Seasonality of the Nominal Interest Rate, and theFounding of the Fed

Jeffrey Miron ()

American Economic Review, 1986, vol. 76, issue 1, 125-40

Abstract: After the founding of the Fed in 1914, the frequency of financial panics and the size of the seasonal movements in nominal interest ratesboth declined substantially. This paper establishes that the Fed, by carrying out the seasonal open market policy that eliminated the seasonal in nominal interest rates, caused the decrease in the frequency of panics. Since seasonal movements are anticipated and financial panics are probably real events, the results show that an anticipated monetary policy had real effects on the economy. Copyright 1986 by American Economic Association.

Date: 1986
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