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 and Department Head (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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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