STATEMENT OF THE ISSUES TO BE INVESTIGATED, FOCUS OF THE INVESTIGATION,
The level of interest rates is a primary point of focus in the efforts of the Board of Governors of the Federal Reserve System to fulfill the System's mandate to, among other things, promote economic growth and preserve economic stability in the United States.1 While there is little doubt that interest rate levels contribute to significant effects in both the domestic economy and the international economic environment, both the magnitude of these effects and the economic sectors most affected are subjects of disagreement.2 Similarly, it is widely acknowledged that the Board of Governors of the Federal Reserve Board is able to influence interest rate levels.3 At dispute, however, are (1) the extent to which Federal Reserve actions influence interest rate levels throughout the economy, and (2) the character of the primary motivations for Federal Reserve actions affecting interest rates responses to market forces or responses to political imperatives.
1Board of Governors, Federal Reserve System, The Federal Reserve System: Purpose and Functions (Washington: Federal Reserve System, 1985), 13 17.
2William F. Hixson, A Matter of Interest: Reexamining Money, Debt, and Real Economic Growth (New York: Praeger Publishers, 1991), 21 25; Hans Werner Sinn, "American Economic Policy and the International Debt Crisis," National Bureau of Economic Research Working Paper No. 3532 (Washington: National Bureau of Economic Research, December 1990), 3.
3G. Epstein, "Federal Reserve Behavior and The Limits of Monetary Policy in The Current Economic Crisis," In Monetary and Fiscal Policy. Washington: The Brookings Institution, 1988, 247 249.This research explores the issues and questions stated above. In this process, the concept of interest and its role in an economy are examined, as is the role of the Board of Governors of the Federal Reserve System in the use of int...