IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v9y1991i3p46-58.html
   My bibliography  Save this article

Institutional Preservation At The Federal Reserve

Author

Listed:
  • ROBERT D. AUERBACH

Abstract

This paper explains and presents supporting evidence for the hypothesis that institutional preservation is the central motive for Federal Reserve decision makers' behavior. Welfare maximization can, under certain conditions (i.e., via a vote maximization motive or the direct attribution of socially desirable goals), be a part of the preservation hypothesis, but it is inconsistent with substantial parts of Federal Reserve behavior. This paper presents evidence of this inconsistent behavior that the preservation hypothesis can explain. Such evidence includes opposing better coordination with voters'choices, creating an internally authorized fund that makes foreign loans without congressional authorization, opposing better monetary control procedures, organizing lobbying campaigns to defeat legislation to audit the Federal Reserve and make its meetings open to public scrutiny, failing to take minutes after legislation was enacted, and impairing information dispersal about funding for the Watergate burglars. The paper analyzes, in terms of institutional preservation, the results of recent research on the relationship of central banks' independence from short‐run political forces and their anti‐inflationary monetary policies.

Suggested Citation

  • Robert D. Auerbach, 1991. "Institutional Preservation At The Federal Reserve," Contemporary Economic Policy, Western Economic Association International, vol. 9(3), pages 46-58, July.
    • Handle: RePEc:bla:coecpo:v:9:y:1991:i:3:p:46-58
    DOI: 10.1111/j.1465-7287.1991.tb00340.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1465-7287.1991.tb00340.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1465-7287.1991.tb00340.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Eugenia Toma & Mark Toma, 1985. "Research activities and budget allocations among Federal Reserve Banks: Reply," Public Choice, Springer, vol. 45(2), pages 197-198, January.
    2. Thomas Havrilesky, 1990. "Distributive Conflict And Monetary Policy," Contemporary Economic Policy, Western Economic Association International, vol. 8(2), pages 50-61, April.
    3. Neil Skaggs & Cheryl Wasserkrug, 1983. "Banking sector influence on the relationship of Congress to the Federal Reserve System," Public Choice, Springer, vol. 41(2), pages 295-306, January.
    4. Corrado, Charles J. & Taylor, Dean, 1986. "The cost of a central bank leaning against a random walk," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 303-314, September.
    5. Frey, Bruno S. & Schneider, Friedrich, 1981. "Central bank behavior : A positive empirical analysis," Journal of Monetary Economics, Elsevier, vol. 7(3), pages 291-315.
    6. Friedman, Milton, 1982. "Monetary Policy: Theory and Practice: A Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(3), pages 404-406, August.
    7. Thomas Mayer, 1987. "Replacing The Fomc By A Pc," Contemporary Economic Policy, Western Economic Association International, vol. 5(2), pages 31-43, April.
    8. Blackburn, Keith & Christensen, Michael, 1989. "Monetary Policy and Policy Credibility: Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 27(1), pages 1-45, March.
    9. Friedman, Milton, 1982. "Monetary Policy: Theory and Practice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(1), pages 98-118, February.
    10. Albert E. Burger, 1972. "Money stock control," Review, Federal Reserve Bank of St. Louis, vol. 54(Oct), pages 10-18.
    11. Acheson, Keith & Chant, John F, 1973. "Bureaucratic Theory and the Choice of Central Bank Goals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(2), pages 637-655, May.
    12. Weintraub, Robert E., 1978. "Congressional supervision of monetary policy," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 341-362, April.
    13. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    14. Stuart Allen & Donald McCrickard & Phillip Cartwright & Charles Delorme, 1988. "The use of inputs by the Federal Reserve System: An extended model," Public Choice, Springer, vol. 59(3), pages 205-214, December.
    15. Shughart, William F, II & Tollison, Robert D, 1983. "Preliminary Evidence on the Use of Inputs by the Federal Reserve System," American Economic Review, American Economic Association, vol. 73(3), pages 291-304, June.
    16. James M. Buchanan, 1949. "The Pure Theory of Government Finance: A Suggested Approach," Journal of Political Economy, University of Chicago Press, vol. 57(6), pages 496-496.
    17. Richard E. Wagner, 1986. "Central Banking and the Fed: A Public Choice Perspective," Cato Journal, Cato Journal, Cato Institute, vol. 6(2), pages 519-543, Fall.
    18. Cukierman, Alex & Meltzer, Allan H, 1986. "A Positive Theory of Discretionary Policy, the Cost of Democratic Government and the Benefits of a Constitution," Economic Inquiry, Western Economic Association International, vol. 24(3), pages 367-388, July.
    19. John Chant & Keith Acheson, 1972. "The choice of monetary instruments and the theory of bureaucracy," Public Choice, Springer, vol. 12(1), pages 13-33, March.
    20. Eugenia Toma & Mark Toma, 1985. "Research activities and budget allocations among Federal Reserve Banks," Public Choice, Springer, vol. 45(2), pages 175-191, January.
    21. Howard R. Bowen, 1943. "The Interpretation of Voting in the Allocation of Economic Resources," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(1), pages 27-48.
    22. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Havrilesky, 1991. "The Psychopathology Of Monetary Policy," Contemporary Economic Policy, Western Economic Association International, vol. 9(3), pages 71-75, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander W. Salter & William J. Luther, 2019. "Adaptation and central banking," Public Choice, Springer, vol. 180(3), pages 243-256, September.
    2. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, September.
    3. Caporale, Tony & Grier, Kevin B, 1998. "A Political Model of Monetary Policy with Application to the Real Fed Funds Rate," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 409-428, October.
    4. Salter, Alexander W. & Smith, Daniel J., 2019. "Political economists or political economists? The role of political environments in the formation of fed policy under burns, Greenspan, and Bernanke," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 1-13.
    5. Gary Anderson & William Shughart & Robert Tollison, 1988. "A public choice theory of the great contraction," Public Choice, Springer, vol. 59(1), pages 3-23, October.
    6. Peter J. Boettke & Daniel J. Smith, 2016. "Evolving views on monetary policy in the thought of Hayek, Friedman, and Buchanan," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 29(4), pages 351-370, December.
    7. Josh Ryan-Collins, 2015. "Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935-75," Economics Working Paper Archive wp_848, Levy Economics Institute.
    8. Goodhart, Charles, 1989. "The Conduct of Monetary Policy," Economic Journal, Royal Economic Society, vol. 99(396), pages 293-346, June.
    9. Jonathan Benchimol & André Fourçans, 2016. "Nominal income versus Taylor-type rules in practice," Working Papers hal-01357870, HAL.
    10. Wm. Mounts & Clifford Sowell & James Lindley, 1985. "Rent-seeking over time: The continuity of capture," Public Choice, Springer, vol. 46(1), pages 87-94, January.
    11. Vaubel, Roland, 1997. "The bureaucratic and partisan behavior of independent central banks: German and international evidence," European Journal of Political Economy, Elsevier, vol. 13(2), pages 201-224, May.
    12. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611.
    13. Thomas Mayer, 2003. "The Monetarist Policy Debate: An Informal Survey," Working Papers 299, University of California, Davis, Department of Economics.
    14. Eugenia Toma & Mark Toma, 1985. "Research activities and budget allocations among Federal Reserve Banks," Public Choice, Springer, vol. 45(2), pages 175-191, January.
    15. John B. Taylor, 2012. "Monetary Policy Rules Work and Discretion Doesn't: A Tale of Two Eras," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(6), pages 1017-1032, September.
    16. William J. Boyes & William Stewart Mounts JR & Clifford Sowell, 1998. "Monetary and Fiscal Constitutions and the Bureaucratic Behavior of the Federal Reserve," Public Finance Review, , vol. 26(6), pages 548-564, November.
    17. Benchimol, Jonathan & Fourçans, André, 2019. "Central bank losses and monetary policy rules: A DSGE investigation," International Review of Economics & Finance, Elsevier, vol. 61(C), pages 289-303.
    18. Béatrice CHERRIER & Jean-Baptiste FLEURY, 2014. "Whose values? The Rise, Fragmentation and Marginalization of Collective Choice in Postwar Economics, 1940-1981," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2014-05-ccr, Condorcet Center for political Economy.
    19. Jonathan Benchimol & André Fourçans, 2017. "Monetary Rule, Central Bank Loss and Household’s Welfare: an Empirical Investigation," Globalization Institute Working Papers 329, Federal Reserve Bank of Dallas.
    20. James Forder, 2002. "Interests and 'Independence': The European Central Bank and the theory of bureaucracy," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 51-69.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:9:y:1991:i:3:p:46-58. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.