Date of Original Version



Working Paper

Rights Management

All Rights Reserved

Abstract or Description

One of the dominant Federal Reserve conceptions centers on the role of Free Reserves in the monetary process. This idea has had an important influence on assessments and on the policies applied in concrete situations. We contend that the Federal Reserve has viewed, and continues to view, free reserves as an element play a causal role of central importance in the monetary process and simultaneously supplying a useful summary measure of "ease and restraint." Detailed evidence is presented in this and a subsequent chapter in support of our contention.


Presented to the Subcommittee on Domestic Finance, Committee on Banking and Currency, US House of Representatives 88th Congress.