Search Results
Working Paper
A Comparison of Fed "Tightening" Episodes since the 1980s
Deciding to undertake a series of tightening actions present unique challenges for Federal Reserve policymakers. These challenges are both political and economic. Using a variety of economic and financial market metrics, this article examines how the economy and financial markets evolved in response to the five tightening episodes enacted by the FOMC since 1983. The primary aim is to compare the most-recent episode, from December 2015 to December 2018, with the previous four episodes. The findings in this article indicate that the current episode bears some resemblance to previous Fed ...
Report
The early years of the primary dealer system
This paper presents a history of the primary dealer system from the late 1930s to the early 1950s. The paper focuses on two formal programs: the ?recognized? dealer program adopted by the Federal Reserve Bank of New York in 1939 and the ?qualified? dealer program adopted by the Federal Open Market Committee (FOMC) in 1944 and abandoned in 1953. Following his selection as Manager of the System Open Market Account (SOMA) in 1939, Robert Rouse formalized the New York Fed?s system of ?recognized? dealer counterparties. Although the Bank typically dealt with recognized dealers, it also did ...
Working Paper
Current Federal Reserve Policy Under the Lens of Economic History: A Review Essay
This review essay is intended as a critical review of Humpage (2015), and it expands on the issues raised in that volume. Federal Reserve Policy during the financial crisis, and in its aftermath are addressed, along with the relationship to historical experience in the U.S. and elsewhere in the world.
Working Paper
Rental Prices and the Cost of Living in the United States, 1914–2006
The Rent of Primary Residence (RoPR) series constructed by the Bureau of Labor Statistics implies that nominal rental prices increased by just 2.6 percent per year from 1914 to 2006 while overall prices grew by 3.3 percent. We show that this “falling real rents” puzzle can be explained by the evolving treatment of shelter in the Consumer Price Index (CPI). In this paper, we construct a new, methodologically consistent shelter price series using the Historical Housing Prices (HHP) Project rental index. We also construct a revised set of shelter weights going back to 1914 and combine it ...
Working Paper
The Price of Housing in the United States, 1890–2006
We construct the first consistent market rent and home sales price series for American cities across the 20th century using millions of newspaper real estate listings. Our findings revise several stylized facts about U.S. housing markets. Real market rents did not fall during the 20th century for most cities. Instead, real rental price levels increased by about 20 percent from 1890 to 2006. There was also greater growth in real housing sales prices from 1965 to 1995 than is commonly understood. Using these series, we document several new facts about housing markets. The return to ...
Working Paper
What the Transcripts Reveal About the FOMC’s Pre-Emptive Easing in July 1995
At their September 2024 meeting, the FOMC began reducing the federal funds target rate and indicating the likelihood of additional reductions by the end of the year and into 2025. The FOMC took this action because of favorable inflation trends and some developing weakness in labor markets. A similar dynamic was at work from 1994 to early 1996. During this period, the FOMC undertook, first, a pre-emptive tightening in policy to combat emerging price pressures and then, second, a pre-emptive easing of monetary policy to counter the expectations of slower real GDP growth or outright recession. ...
Working Paper
Even Keel and the Great Inflation
During the early part of the Great Inflation (1965-1975), the Federal Reserve undertook even-keel operations to assist the US Treasury’s coupon security sales. Accordingly, the central bank delayed any tightening of monetary policy and permanently injected reserves into the banking system. Using real-time Taylor-type and McCallum-like reaction functions, we show that the Fed routinely undertook these operations only when it was otherwise tightening monetary policy. Using a quantity-equation framework, we show that the Federal Reserve’s even-keel actions added approximately one percentage ...
Report
Bank integration and business volatility
We investigate how bank migration across state lines over the last quarter century has affected the size and covariance of business fluctuations within states. Starting with a two-state version of the unit banking model in Holmstrom and Tirole (1997), we conclude that the theoretical effect of integration on business cycle size is ambiguous, because some shocks are dampened by integration while others are amplified. Empirically, we find that integration diminishes employment growth fluctuations within states and decreases the deviations in employment growth across states. In other words, ...
Working Paper
Even Keel and the Great Inflation
Using IV-GMM techniques and real-time data, we estimate a forward looking, Taylor-type reaction function incorporating dummy variables for even-keel operations and a variable for foreign official pressures on the U.S. gold stock during the Great Inflation. We show that when the Federal Reserve undertook even-keel operations to assist U.S. Treasury security sales, the FOMC tended to delay monetary-policy adjustments and to inject small amounts of reserves into the banking system. The operations, however, did not contribute significantly to the Great Inflation, because they occurred during ...
Working Paper
Independent within—not of—Government: The Emergence of the Federal Reserve as a Modern Central Bank
Independence is the hallmark of modern central banks, but independence is a mutable and fragile concept, because the governments to whom central banks are ultimately responsible can have objectives that take precedence over price stability. This paper traces the Federal Reserve?s emergence as a modern central bank beginning with its abandonment of monetary policy for debt-management operations during the Second World War and through the controversies that led to the Treasury-Federal Reserve accord in 1951. The accord, however, did not end the Federal Reserve?s search for independence. After ...