ABSTRACT
This chapter is devoted to a formal statement of the hypotheses to be tested, a quantification of the hypothesis in two different but similar models, and the testing of these models against the data. The approach to be used is discussed, the derivations of the models follow, and the conclusions drawn from the testing are summarized. The approach used in formulating a concise statement of Federal Reserve behavior assumes that the policymakers acted as though they were trying to minimize a disutility function in which their disutility is a positive function of the differences between the actual and desired values of certain target variables. There appears to be no evidence to support Wicker's contention that the primary goal of Federal Reserve policy in this period was the return of the gold standard and the maintenance of same. Open market operations were apparently used primarily to stabilize output and to attempt to stop the growing speculation in the stock market.
