The use of inputs by the Federal Reserve System: An extended mode
- UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
- Stuart D. Allen, Professor (Creator)
- Donald L. McCrickard, Associate professor and Associate Dean (Creator)
- Institution
- The University of North Carolina at Greensboro (UNCG )
- Web Site: http://library.uncg.edu/
Abstract: Recently it has been argued that bureaucratic incentives play an important role in the formulation of policy and the inflationary bias of the Federal Reserve System [Shughart and Tollison (1983), hereafter S—T].1 In particular S—T maintain that the Fed can retain profits denominated in amenities but not in dollars as a result of the Congressional constraint that 'excess profits' be returned to the Treasury. This constraint provides bureaucratic incentives for the Fed to purchase more amenities than a for-profit organization and ex-plains (S—T, 1983: 291) "in part the Fed's apparent inflationary bias." Expansionary monetary policy, then, enlarges the Fed's profit-amenities choices and allows it to pursue its goal of bureaucratic enhancement. S—T assume that the dollar value of these amenities is a monotonic transformation of Fed employment. Using this public choice framework, they develop a model in which the monetary base is a function of a number of variables including employment in the Federal Reserve System (SYSEMP).
The use of inputs by the Federal Reserve System: An extended mode
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Created on 11/12/2010
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Additional Information
- Publication
- Public Choice, 59(3) December, 205-214.
- Language: English
- Date: 1988
- Keywords
- Federal reserve, Fiscal policy, Finance, Interest rates, Incentives, Public choice