The Federal Reserve System has been widely criticised for its response (or lack of response) to the economic and financial problems of 1928-1933. This period was one of frantic speculation followed by the collapse of the stock market, the banking system and the economy at large. How did the Fed let this happen, and was it to blame? This book, first published in 1993, carries out an in-depth statistical analysis of the relevant data supporting the various theories surrounding the Fed’s behaviour at the time, and is a key work in understanding the thinking of the period.
1. Introduction 2. Federal Reserve Behavior 2.1. Friedman and Schwartz’s Theory of Inconsistent Behavior 2.2. Wicker’s ‘International’ Theory 2.3. The ‘Domestic’ Theory of Brunner and Meltzer 2.4. Similarities and Differences in the Alternative Explanations 2.5. Criticism 2.6. More on Federal Reserve Theory 2.7. Summary 3. Federal Reserve Behavior: Quantification and Testing 3.1. The Assumption of a Disutility Function 3.2. The Two Models: An Overview 3.3. Model 1: The Short-Term Money Market As the Goal 3.4. Model 2: The Ultimate Target Variables As the Goals 3.5. The Time Period and the Data Used in Testing 3.6. Results of the Tests of Model 1 3.7. Results of the Tests of Model 2 3.8. Further Results and a Comment on Alternative Formulations 4. Summary