The Monetary Policy of the Federal Reserve: A History (Studies in Macroeconomic History) [Hardcover]

Robert L. Hetzel (Author)

Book Description

Publication Date: March 17, 2008 | ISBN-10: 0521881323 | ISBN-13: 978-0521881326 | Edition: 1

The Monetary Policy of the Federal Reserve details the evolution of the monetary standard from the start of the Federal Reserve through the end of the Greenspan era. The book places that evolution in the context of the intellectual and political environment of the time. By understanding the fitful process of replacing a gold standard with a paper money standard, the conduct of monetary policy becomes a series of experiments useful for understanding the fundamental issues concerning money and prices. How did the recurrent monetary instability of the 20th century relate to the economic instability and to the associated political and social turbulence? After the detour in policy represented by FOMC chairmen Arthur Burns and G. William Miller, Paul Volcker and Alan Greenspan established the monetary standard originally foreshadowed by William McChesney Martin, who became chairman in 1951. Monetary Policy explains in a straightforward way the emergence and nature of the modern, inflation-targeting central bank.

Editorial Reviews

Review

"The Monetary Policy of the Federal Reserve: A History is a comprehensive study of the evolution of monetary policy practiced by the Federal Reserve since its founding nearly a century ago. Hetzel brings a unique perspective to this material, a monetarist point of view rooted in his U of Chicago training, but a view profoundly influenced by an understanding of monetary policy in practice acquired as a life-long policy advisor at the Federal Reserve Bank of Richmond. The story is one of a nominal anchor for monetary policy lost with the collapse of the gold standard and found after decades of monetary turbulence in the priority that the Federal Reserve puts on low inflation and in anchoring inflation expectations. Hetzel enriches the story with remarkable insights about Federal Reserve behavior and with key insights from the modern New Neoclasscial Synthesis (New Keynesian) theory of monetary policy. This is an amazing story, one that Hetzel tells in great detail and with great enthusiasm." - Marvin Goodfriend, Carnegie Mellon University

"An invaluable historical account of the history of U.S. monetary policy under the Federal Reserve System." - Robert G. King, Boston University

"Robert Hetzel's chronicle of the turning points in Federal Reserve conduct of monetary policy illuminates the problems that successive chairmen from William McChesney Martin on encountered in transforming the central bank into the modern Fed. Hetzel describes three monetary experiments beginning with a detour to the real bills doctrine, followed by decades of stop-go experience until the Paul Volcker-Alan Greenspan disinflation that ushered in a new monetary standard. Over time the Fed learned rule-like behavior that created expectations by the public of low stable inflation that is now the nominal anchor for a fiat money regime. It differentiates monetary policy as practiced before the 1980s from its practices since. Hetzel has written a path-breaking study." - Anna J. Schwartz, National Bureau of Economic Research

"Hetzel... has produced a meticulous examination of monetary policy by the Federal Reserve over time under different chairpersons, with much attention given to the Volcker-Greenspan era. Recommended." - Choice

"The Monetary Policy of the Federal Reserve: A History by Robert Hetzel studies the evolution of monetary policy from the beginning of the Federal Reserve until the end of the Greenspan Era. The title claims the book is a history, and it is that, but it is much more. As a history, Hetzel's book details the conduct of monetary policy over nearly ninety years, and sets that conduct in the context of the intellectual and political environment of the time. As an economic synthesis, Hetzel's book views the evolution of monetary policies as a series of experiments useful for understanding fundamental issues concerning money, prices, and macroeconomic policy. The past serves as a laboratory for understanding the present. The emergence of modern monetary policy and prospects for our nation's financial future are understood by studying the learning-curve of the leaders of the Federal Reserve, the painful process of replacing the gold standard with a fiat money standard, and the recurrent monetary instability during the decades following the Second World War." - EH.net

"Hetzel's book deepens our understanding... of the entire story of this important period. It deserves a place on the bookshelf of every serious student of monetary history." - Christina D. Romer, Journal of Economic History

Book Description

The Monetary Policy of the Federal Reserve details the evolution of the monetary standard from the start of the Federal Reserve through the end of the Greenspan era. Monetary Policy explains in a straightforward way the emergence and nature of the modern, inflation-targeting central bank.

Product Details

• Hardcover: 408 pages
• Publisher: Cambridge University Press; 1 edition (March 17, 2008)
• Language: English
• ISBN-10: 0521881323
• ISBN-13: 978-0521881326
• Product Dimensions: 9.4 x 6.5 x 1.1 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #721,002 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

11 of 12 people found the following review helpful:

4.0 out of 5 stars A rigorous analysis of the Fed's triumphs and failures, May 19, 2008

By 

Garett Jones (Fairfax, VA, USA) - See all my reviews
(REAL NAME)   

This review is from: The Monetary Policy of the Federal Reserve: A History (Studies in Macroeconomic History) (Hardcover)

This book is a 21st century version of Friedman and Schwartz's classic Monetary History of the United States. The monetarist-leaning author shows how the Fed won the battle over inflation in some decades but lost the battle in others. Citing hundreds of FOMC transcipts and interviews with key decisionmakers, the author provides an almost anthropological account of what it means to be "soft on inflation" or "tough on inflation."

I didn't agree with everything in the book, and that's a sign of just how good it is: Hetzel takes strong positions and argues them with statistical and archival evidence. I wrote an enormous amount in the margins--the hints of future lecture notes from when I (surely) teach with this book in the near future.

One of the great services Hetzel performs is dragging into the light quotes from old-line Keynesians (including some Nobel Laureates) who said it was impossible or impractical to bring inflation down from 6% to 1% (sic), as well as quotes from famous Keynesians who argued that inflation-fighting wasn't even the Fed's business.

Those guys had it wrong, wrong, wrong. Nowadays, almost all macroeconomists seem to agree that long-lasting "inflation is always and everywhere a monetary phenomenon," as Milton Friedman used to say, but elite economists in the 50's, 60's, and 70's mocked such views. Hetzel has the goods on those who mocked the monetarists, one of the many little treasures in this fascinating volume.

5 of 6 people found the following review helpful:

4.0 out of 5 stars Challenging, but ever so educational book, October 8, 2009

By 

Sharon E. Eicher "SEicher" (Midwest USA) - See all my reviews
(REAL NAME)   

This review is from: The Monetary Policy of the Federal Reserve: A History (Studies in Macroeconomic History) (Hardcover)

This is an extremely educational book about the development of Federal Reserve policy as well as about the development of the Central Bank. What I most enjoy reading is the interplay between the monetary policymakers and the political policymakers. The vocabulary is a bit specific, even for an economist, and one will have to work a bit to follow the discussion.