By now it has become obvious that Federal Reserve actions have an immense impact on the functioning of our economy. As a result, a great deal of research has been done on the Fed and on monetary policy. Much of this work is normative; it tells us what the Fed should do. Positive work on the Fed has usually tried to elucidate particular Fed policies, and has not tried to present a theory of why the Fed behaves the way it does. The dominant theory of Fed behavior is that the Fed does what it believes to be best for the public welfare. This theory - usually left implicit - is so simple, and...

By now it has become obvious that Federal Reserve actions have an immense impact on the functioning of our economy. As a result, a great deal of research has been done on the Fed and on monetary policy. Much of this work is normative; it tells us what the Fed should do. Positive work on the Fed has usually tried to elucidate particular Fed policies, and has not tried to present a theory of why the Fed behaves the way it does. The dominant theory of Fed behavior is that the Fed does what it believes to be best for the public welfare. This theory - usually left implicit - is so simple, and...

Monetary Policy and the Onset of the Great Depression challenges Milton Friedman and Anna Schwartz's now consensus view that the high tide of the Federal Reserve System in the 1920s was due to the leadership skills of Benjamin Strong, head of the Federal Reserve Bank of New York.