Today, most scholars agree that mismanaged monetary policy contributed to the length and severity of the Great Depression in the USA. There is little agreement, however, about the causes of the Federal Reserve's mistakes. This book examines the policy strategy developed by the Federal Reserve during the 1920s and considers whether its continued use could explain the Federal Reserve's failure to respond vigorously to the depression. It also studies the effects on policy of the institutional changes occurring prior to the depression. While these changes enhanced the authority of officials who opposed open-market purchases and also caused some upward bias in discount rates, Wheelock concludes that monetary policy during the depression was in fact largely a continuation of the previous policy. The apparent contrast in the institution's responsiveness to economic conditions between the 1920s and early 1930s resulted from the consistent use of a procyclical policy strategy that caused it to respond more vigorously to minor recessions than to severe depressions.
• Asks what role the USA Federal Reserve had in the causes of the Great Depression • Tests the thesis that changes in Federal Reserves policy just before the depression lessened the Federal Reserves responsiveness to dramatic changes in economic conditions
List of figures; List of tables; Preface; 1. Introduction; 2. The objectives of monetary policy, 1924–33; 3. Member bank borrowing and the Fed's policy strategy; 4. Policy disagreements within the Federal reserve system: the effects of institutional change; 5. Conclusion; References; Index.