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The Empirical Validity of Central Banking Theories in the United States of America: An Evaluation
Credit and Capital Markets – Kredit und Kapital, Vol. 12 (1979), Iss. 4 : pp. 457–471
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Lucia, Josef
Abstract
The Empirical Validity of Central Banking Theories in the United States of America: An Evaluation
An analysis of the variables the Federal Reserve is able to control indicates monetary policy has been very muchmoney market oriented as the Fed offset reserve gains (or losses) stemming from market forces and loan demand. Together with their money market orientation, the central bank allowed the monetary aggregates to behave in a procyclical rather than a contracyclical manner; the federal funds rate, on the other hand, did behave more contracyclically. Contrary to popular impression, monetary policy was, in the main, accomodative to fiscal policy by moving in the same direction as the budget, raising questions as to the alleged independence of the U.S. central bank