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Working Paper 1996-001A

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"Discount Rate Policies of Five Federal Reserve Chairmen"
by Daniel L. Thornton

This paper investigates the discount rate policies of five Federal Reserve chairmen: Martin, Burns, Miller, Volcker and Greenspan. Both in terms of the reasons given for making discount rate changes and the frequency of discount rate changes, the discount rate policies of Martin and Greenspan were very similar, as were those of Burns and Volcker. The discount rate policy of Chairman Miller differed from either of these groups. Measured by the money market's response to discount rate changes, the discount rate policy of Burns and Volcker was the most effective and Miller's the least effective. Evidence is presented that suggests that the differential response is due to the fact that the discount rate policy of Burns and Volcker provided the market with more complete information than that of Martin and Greenspan. The evidence also supports critics of the Federal Reserve's discount rate policy prior to the early 1960s.

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Category > Monetary Policy/Macroeconomics
Author > Daniel L. Thornton