Could the United States have had a better central bank? An historical counterfactual speculation

Abstract

This article argues that two alternative hypothetical central bank scenarios could have improved upon the Federal Reserve's track record with respect to financial stability and possibly overall macroeconomic performance in its first century. The first scenario is to assume that the charter of the Second Bank of the United States had not been revoked by Andrew Jackson in 1836 and the Second Bank survived. The second scenario takes as given that the Second bank did not survive and history evolved as it did , but considers the situation in which the Federal Reserve Act of 1913 was closer to the original plan for a central bank proposed by Paul Warburg in 1910. © 2012 Elsevier Inc.