The Failure of the Fed

Coming across this paper by George Selgin, William D. Lastrapes, and Lawrence H. White, one can’t help wondering how the Bank of Canada (B0C) would fare under similar scrutiny. One suspects the BoC’s record, both in terms of keeping inflation under control and minimizing the economy’s volatility, would come to sight as unimpressive as that of the US Federal Reserve.

Here is the abstract of the must-read paper by Selgin et al entitled, “Has the Fed Been a Failure?”:

As the one-hundredth anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation‘s experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed‘s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed‘s establishment. (2) While the Fed‘s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.

If someone out there happens to be aware of a similar academic analysis of the BoC, let me know.

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