Henry Thornton's Paper Credit of Great Britain (1802) established once and for all the notion that central banks have the prime responsibility for controlling the money stock and the price level. This theme and the analytical framework underlying it reappeared in the famous Bullion Report...

The monetary standard emerges out of the interaction of monetary policy with the structure of the economy. Characterization of the monetary standard thus requires specification of a model of the economy with a central bank reaction function. Such a specification raises all the fundamental issues...

An intellectual consensus over how central banks control inflation has not accompanied the broad public consensus that central banks should control inflation. Because of their monopoly over monetary base creation, there has long been a tradition associating the control of inflation with the...

The economic difficulties manifest in communist countries have encouraged a desire in many of them to move toward a market economy. This paper surveys specific reasons for the breakdown of centrally planned economies and discusses the difficulties of making the transition to a market economy. A...

In today's world of paper money, money consists of currency created by the printing press and bank deposits created by the bookkeeping operations of bankers. What limits the ability of the printing presses and the pens of bankers to create money? The currency component of money is central bank...

The founders of the Federal Reserve desired to end financial panics. In order to achieve this end, they created a decentralized collection of reserve depositories — the Federal Reserve banks. They also wanted to remove control of the financial system from Wall Street. At the time, policymakers...

Since the establishment of the Federal Reserve System in 1913, policymakers have always pursued the goal of economic stability. At the same time, their understanding of the world and of the role of monetary policy has changed dramatically. This evolution of views provides a laboratory for...

The United States Congress created the Federal Reserve System in 1913. The System consists of the Federal Reserve Board in Washington, D.C.; 12 Federal Reserve Banks; and thousands of member commercial banks. This entry describes the evolution of the System and of monetary policy from its...

The FOMC lacks systematic procedures for learning from experience what monetary policies have stabilized the economy and what monetary policies have destabilized it. Standard Fed narrative prevents such learning by assuming that all adverse outcomes arise from external shocks, which the Fed...