Shifting Mandates: The Federal Reserve's First Centennial
The mandate of the Federal Reserve has evolved considerably over its hundred-year history. From an initial focus in 1913 on financial stability, to fiscal financing in World War II and its aftermath, to a strong anti-inflation focus from the late 1970s, and then back to greater emphasis on financial stability since the Great Contraction. Yet, as the Fed's mandate has expanded in recent years, its range of instruments has narrowed, partly based on a misguided belief in the inherent stability of financial markets. We briefly discuss the active use in an earlier era of multiple instruments, including reserve requirements, credit controls and interest rate ceilings.
This paper was prepared for the American Economic Association session Reflections on the 100th Anniversary of the Federal Reserve, Alan Blinder, Chair. The authors would like to thank Charles Plosser and Vincent Reinhart for comments and suggestions. Forthcoming in American Economic Review Papers and Proceedings, May 2013. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Carmen M. Reinhart & Kenneth S. Rogoff, 2013. "Shifting Mandates: The Federal Reserve's First Centennial," American Economic Review, American Economic Association, vol. 103(3), pages 48-54, May. citation courtesy of