A regional analysis of federal reserve districts

The U.S. Federal Reserve System (Fed) has a unique regional structure, one with a large amount of autonomy and authority for its twelve regional district banks. In this paper we briefly review the history behind establishment of this structure in 1913, and address the question, “Does this unchanged regional structure of the Fed make sense today?” Three criteria are used to assess the appropriateness of the regional structure: 1) proportionality of representation in monetary policy decisions, 2) the functional economic nature of Fed district boundaries, and 3) the quality of regional economic reporting by regional district banks. After finding substantial shortcomings in all areas, we propose a more modern set of district boundaries, which improves proportionality of representation, recaptures the functional economic character of Fed districts, while maintaining the possibility of meaningful district-wide regional economic reporting and analysis.