The Federal Reserve's Attachment to the Free Reserve Concept

One of the dominant Federal Reserve conceptions centers on the role of Free Reserves in the monetary process. This idea has had an important influence on assessments and on the policies applied in concrete situations. We contend that the Federal Reserve has viewed, and continues to view, free reserves as an element play a causal role of central importance in the monetary process and simultaneously supplying a useful summary measure of "ease and restraint." Detailed evidence is presented in this and a subsequent chapter in support of our contention.