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Has the Fed been a failure?

George Selgin, William Lastrapes () and Lawrence White ()

Journal of Macroeconomics, 2012, vol. 34, issue 3, 569-596

Abstract: As the 100th anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation’s experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed’s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment. (2) While the Fed’s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.

Keywords: Federal reserve system; National banking system; Inflation; Business cycles; Banking panics; Lender of last resort; Monetary reform; Fiat money; Gold standard; Great moderation (search for similar items in EconPapers)
JEL-codes: E30 E42 E52 E58 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:3:p:569-596

DOI: 10.1016/j.jmacro.2012.02.003

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