Do the Voting Rights of Federal Reserve Bank Presidents Matter?

Regional Dissent: Do Local Economic Conditions Influence FOMC Votes?

“…The main differences between Fos and Xu (2023) and our paper are fourfold. First, as a measure of economic activity, Fos and Xu (2023) use quarterly personal income growth at the state level, so aggregation to Fed districts is imperfect.…”

“…The main differences between Fos and Xu (2023) and our paper are fourfold. First, as a measure of economic activity, Fos and Xu (2023) use quarterly personal income growth at the state level, so aggregation to Fed districts is imperfect. In contrast, we use monthly unemployment at the county level, which allows clean aggregation to the Fed-district level and provides a higher-frequency measure of economic activity.…”

“…However, they find no evidence that the relationship between interest rate decisions and regional heterogeneity is driven by FOMC members voting based on their regions of origin. The paper most closely related to ours is Fos and Xu (2023). The authors test whether district presidents cast dissenting votes at the FOMC based on the economic conditions in their own districts.…”

“…Unemployment also has the advantage of being related directly to one of the two pillars of the Fed's dual mandate (full employment and price stability). Second, as their baseline measure of inflation, Fos and Xu (2023) use overall inflation from the BLS for the most populous Metropolitan Statistical Area (MSA) in a Fed district, while we use non-tradable state-level inflation from Hazell et al (2022) and aggregate that to the Fed-district level using population weights. 3 Third, the regression specification in our paper includes dissents for looser and tighter symmetrically (coded as 1 and -1 respectively), while Fos and Xu (2023) study either dissent regardless of direction, or dissents for tighter and easier separately.…”

“…Second, as their baseline measure of inflation, Fos and Xu (2023) use overall inflation from the BLS for the most populous Metropolitan Statistical Area (MSA) in a Fed district, while we use non-tradable state-level inflation from Hazell et al (2022) and aggregate that to the Fed-district level using population weights. 3 Third, the regression specification in our paper includes dissents for looser and tighter symmetrically (coded as 1 and -1 respectively), while Fos and Xu (2023) study either dissent regardless of direction, or dissents for tighter and easier separately. 4 Finally, in terms of results, we find that inflation is not statistically significant for driving dissent at the FOMC while unemployment is statistically and economically significant.…”