Many economists take for granted that the Federal Reserve has positively contributed to economic stabilization in the U.S. In particular, it is widely believed that the Fed has helped tame business cycles and lower macroeconomic volatility. Despite this conventional view, surprisingly few comprehensive academic studies exist that assess the Federal Reserve’s overall performance since its founding in 1913. A close look at the evidence suggests that the conventional view should be re-evaluated. Several studies suggest that data deficiencies caused key pre-Fed-era data to appear more volatile than their Fed-era counterparts. There is, in fact, evidence that the Fed has not been as effective as once thought in accomplishing its stabilization goals, and even some evidence that the Fed era has had more economic instability than before the Fed’s creation.
There’s no doubt Austrian economists and other Fed critics will be shocked — shocked! — by Michel’s findings.