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).

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