Interest Rate Controls: The United States in the 1940s

Mark Toma

31 citations0/0 files storedThe Journal of Economic History

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Monetary Policy and Economic Impact Historical Economic and Social Studies Economic theories and models

Abstract

In 1942 the U.S. Treasury and the Federal Reserve agreed to keep the interest rate on long-term government bonds below a ceiling of 2.5 percent. Assuming rational expectations, the ceiling on long-term interest rates can be viewed as a government commitment to low long-run inflation. The Fed also agreed to buy and sell short-term government bonds at a below-market rate of 3/8 percent. This policy did not result in long-run inflation because it was narrowly confined to 3-month Treasury bills.

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2017A Monetary History of the United States, 1867-1960 1964A Monetary History of the United States 1867-1960 1964A Monetary History of the United States, 1867-1960 1982Monetary Trends in the United States and the United Kingdom 1990Modern Business Cycle Theory 1989The Neoclassical Approach to Fiscal Policy 1986Some issues concerning interest rate pegging, price level determinacy, and the real bills doctrine 1987Interest rate smoothing and price level trend-stationarity

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