A Literature Review on the Institutional Framework of the Federal Reserve's Dual Mandate

As the central bank of the United States, the Federal Reserve conducts a monetary policy—including interest rate regulation and money supply—that not only affects domestic inflation and employment but also exerts significant global spillover effects. The 1977 amendment to the Federal Reserve Act established the Fed's "dual mandate" framework—stabilizing prices and promoting maximum employment. Over the past two decades, the U.S. has faced multiple economic shocks, including the subprime mortgage crisis, the COVID‑19 pandemic, and persistent high inflation. In stagflationary environments, inflation and employment objectives often conflict, making the dual mandate a focal point in macroeconomic discussions. This paper employs literature review and comparative analysis methods, drawing on academic journals and official Federal Reserve reports to trace the historical background and legal origins of the dual mandate, summarize scholarly support for and critiques of the system, compare theoretical differences between the dual mandate and single inflation targeting frameworks, and assess the impact of the dual mandate on the Fed's monetary policy choices over the past twenty years. Most existing studies examine inflation or labor markets separately, thereby lacking a systematic integration and synthesis of research on the dual mandate. Comparative analysis reveals that the dual mandate offers greater policy flexibility during recessions and crises, while single inflation targeting excels in maintaining long‑term price stability. Neither system is universally superior, their effectiveness depends on specific economic cycles. By integrating diverse research findings and comparing the practical performance of these two central banking frameworks under different economic conditions, this study enhances understanding of institutional design logic in advanced economies and provides insights into China's macroeconomic policy approach, which seeks to balance price stability with employment protection.