Mark Carlson, Federal Reserve Board
"“Unconventional” Monetary Policy as Conventional Monetary Policy: A perspective from the U.S. in the 1920s”
Abstract: To implement monetary policy in the 1920s, the Federal Reserve utilized administered interest rates and conducted open market operations in both government securities and private money market securities, sometimes in fairly considerable amounts. We show how the Fed was able to effectively use these tools to influence conditions in money markets, even those in which it was not an active participant. We also provide evidence that the changes in money market conditions resulting from changes in monetary policy affected the issuance of money market securities. These results point to a channel through which monetary policy was transmitted to the rest of the economy. The tools used in the 1920s by the Federal Reserve resemble the extraordinary monetary policy tools used by central banks recently and provide further evidence on their effectiveness even in ordinary times.