Private Sector Response to Stabilization Policy: A Case Study
This thesis can be viewed as a case study of the proposition that anticipated monetary policy is ineffective. The problem studied relates to the monetary policy employed by Leslie M. Shaw, Secretary of the Treasury, 1902-1907. A basic problem of that era was the annual autumn drain of specie from the banks of New York City to relieve the pressure on bank reserves and interest rates which accompanied this specie drain. This study shows that though these deposits were anticipated, they were also perceived to add to the riskiness of deposit flows, the net effect being no change in bank lending in anticipation of possible government deposits. Instead the banks decided to "wait and see" what Shaw would do before they made any change in policy. Thus when Shaw did deposit government funds in the banks, bank reserves increased and interest rates decreased as he had intended.
University of Illinois - Urbana-Champaign
Networked Digital Library of Theses and Dissertations
University of Illinois at Urbana-Champaign