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American Economic Review Vol. 103 No. 3 2013

Shifting Mandates: The Federal Reserve's First Centennial

Carmen Reinhart1; Kenneth Rogoff2

1 Minos A. Zombanakis Professor of the International Financial System, Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138. · 2 Thomas D. Cabot Professor of Public Policy, Economics Department, Harvard University, Littauer Center 216, Cambridge, MA 02138.

Abstract

The Federal Reserve's mandate has evolved considerably over the organization's hundred-year history. It was changed 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 argue for a return to multiple instruments, including a more active role for reserve requirements.

DOI
10.1257/aer.103.3.48
Volume
103
Issue
3
Pages
48-54
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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