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In-Depth Research

/files/pdfs/commentary/SOMC_calomiris.pdf

Restoring Monetary Policy Independence: The Risks of Regulatory Reform

Charles W. Calomiris | Shadow Open Market Committee Symposium | March 29, 2010

Monetary policy independence is often discussed, but almost never defined. What does it mean for a central bank like the Fed to be independent in the context of American political institutions? What is the point of its being independent? What threatens beneficial independence, and how should current reformers of financial regulation think about the likely consequences of increasing or decreasing the Fed’s regulatory powers or mandates on the Fed’s monetary independence?

/files/pdfs/commentary/SOMC_mccallum.pdf

The Rationale for Independent Monetary Policy

Bennett T. McCallum | Shadow Open Market Committee Symposium | March 29, 2010

In the present paper, McCallum argues that a crucial aspect of monetary policy is a systematic discrepancy in the times that elapse after policy actions before the observance of real and monetary effects. This discrepancy lends an inflationary bias toward policy efforts that is more pronounced, the more impatient is the policymaker. Finally, McCallum compares current monetary practices with those specified by the U.S. Constitution, and indicate how the intentions promoted by the Constitution could be fulfilled under today’s fiat money monetary

/files/pdfs/commentary/SOMC_goodfriend.pdf

Clarifying Central Bank Responsibilities for Monetary Policy, Credit Policy, and Financial Stability

Marvin Goodfriend | Shadow Open Market Committee Symposium | March 29, 2010

Independence has long been recognized as an essential element of effective central banking. The extraordinary central bank interventions in the recent credit turmoil precipitated a reconsideration of the nature of that independence. On one side, the Federal Reserve has been commended for its willingness to provide generous support for the financial system in lieu of congressional support that was not always forthcoming.

Monetary Policy 1.0

Gregory D. Hess | Shadow Open Market Committee Symposium | March 26, 2010

It was only just a few years ago that monetary policy experts had universally converged on a small set of central bank principles, Monetary Policy 1.0. These simple principles were based firmly on a central bank’s credibility and the trust the central bank inspired in businesses, households and financial market. However, some prominent economic policymakers now openly question some of the principles of Monetary Policy 1.0, and in turn wish to make a new, more fashionable Monetary Policy 2.0. We should all be concerned at this turn of events.

The Federal Reserve: Independence Gained, Independence Lost…

Michael D. Bordo | Shadow Open Market Committee Symposium | March 26, 2010

The Fed since its establishment in 1914 has had to struggle to maintain its independence from the Treasury and so recent experience must be viewed in historical context. The Federal Reserve Act gave the institution a considerable amount of independence from the fiscal authority. The Reserve banks could set their discount rates based on the demands by member banks to discount eligible paper. Government securities were not included in eligible paper so that the Fed, was not created to be a central bank to finance short run government revenue shortfalls.

Monetary Policy Independence Amid Fiscal Policy Deterioration

Mickey D. Levy | Shadow Open Market Committee Symposium | March 26, 2010

Monetary policy and fiscal policy serve different functions and have very different economic effects, but too frequently, their roles and effects are confused. Economic performance is best served when monetary and fiscal policy roles are clearly delineated. Now more than ever, with so many concerns about the economic recovery, jobs and mounting budget deficits, maintaining the Federal Reserve’s independence in the conduct of monetary policy and re-establishing the optimal boundaries between monetary and fiscal policies is critically important to sustained healthy economic performance.

Transcript from SOMC Symposium

Shadow Open Market Committee Symposium | March 26, 2010

Download the transcript of the Shadow Open Market Committee Symposium, which took place on March 26th in New York, NY. Read remarks from Federal Reserve Governor Kevin Warsh on the subject of central bank independence.

http://cbo.gov/ftpdocs/113xx/doc11379/Manager%27sAmendmenttoReconciliationProposal.pdf

Cost Estimate for H.R. 4872, Reconciliation Act of 2010

Congressional Budget Office | March 20, 2010

/files/pdfs/in-depth-research/03_18_2010_Greece.pdf

The Painful Arithmetic of Greek Debt Default

Charles W. Calomiris | March 18, 2010

Charles Calomiris examines Greece’s current and future fiscal affairs. Professor Calomiris concludes that it is unlikely that Greece will be forced to leave the euro zone this year, owing to the likely support of other euro zone countries (which its recent fiscal reforms likely have secured). But, he then lays out the case for why Greece – within only a few short years – is likely to leave the euro zone forever.

http://cop.senate.gov/documents/cop-031110-report.pdf

The Unique Treatment of GMAC Under TARP

Congressional Oversight Panel | March 10, 2010

The Congressional Oversight Panel's March oversight report, "The Unique Treatment of GMAC Under TARP," finds that Treasury's early decisions in its rescue of GMAC resulted in missed opportunities to increase accountability and better protect taxpayers. The Panel is also deeply concerned that Treasury has not required GMAC to lay out a clear path to viability or a strategy for fully repaying taxpayers. Despite a $17.2 billion TARP investment, there is still no clear business plan for GMAC.