Does the Greenspan era provide evidence on leadership in the FOMC?

El‐Shagi, Makram; Jung, Alexander

doi:10.1016/j.jmacro.2014.11.001

Cited by 21 publications

(19 citation statements)

References 62 publications

(71 reference statements)

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“…This is evident from the estimated inflation gap coefficients , which exceed unity ( 1) in a statistically significant manner for all individual reaction functions of all members. In line with other studies (see Jung, 2013;El-Shagi and Jung, 2013), FOMC members' parameter estimates for the response to inflation and output are fairly similar. Nevertheless, the constant , which measures the individual natural rate of interest, differs across members.…”

supporting

confidence: 89%

“…It implies that policy-makers need several meetings to align the fed funds rate with their interest rate preferences. Inertia in setting interest rates is typically modelled by specifying a Taylor rule with the lagged policy rate on the right hand side (see Orphanides, 2001;Fendel and Rülke, 2012;El-Shagi and Jung, 2013). Sack and Wieland (2000) suggest that interest rate smoothing would be consistent with optimal monetary policy if it reflects forward-looking behaviour by market participants, a measurement error concerning key indicators and uncertainty regarding structural parameters.…”

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confidence: 99%

“…16 Therefore, it may no longer be possible to check for the influence of an omitted variable once the Taylor rule is augmented to include the lagged policy rate. In order to provide a check for the robustness of our results, we specify a Taylor-type rule (see El-Shagi and Jung, 2013) which includes the lagged policy rate, augment this reaction function with a regional variable z n , and test the two hypotheses again:…”

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Do federal reserve bank presidents have a regional bias?

Jung

Latsos

2015

European Journal of Political Economy

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In 2014 all ECB publications feature a motif taken from the €20 banknote.NOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily refl ect those of the ECB. Augmented Taylor rules with inertia, however, show that this finding could also be due to the presence of an interest rate smoothing motive.JEL Codes: C12, C30, D72, E58

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Do federal reserve bank presidents have a regional bias?

Jung

Latsos

2015

European Journal of Political Economy

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“…Tillmann (2010) finds that FOMC members reveal an implicit tradeoff between inflation and unemployment in the short run when submitting individual forecasts; however, the slope of the so-called Phillips curve changes over the sample period. El-Shagi and Jung (2015) use the forecast data to derive individual reaction functions of FOMC members. They conclude that regional Bank presidents' reaction functions did not systematically differ from the reaction function of the Chairman.…”

Section: Introductionmentioning

confidence: 99%

Regional, individual and political determinants of FOMC members' key macroeconomic forecasts

Eichler

Lähner²

2017

Journal of Forecasting

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We study Federal Open Market Committee members' individual forecasts of inflation and unemployment in the period 1992-2004. Our results imply that Governors and Bank presidents forecast differently, with Governors submitting lower inflation and higher unemployment rate forecasts than bank presidents. For Bank presidents we find a regional bias, with higher district unemployment rates being associated with lower inflation and higher unemployment rate forecasts. Bank presidents' regional bias is more pronounced during the year prior to their elections or for nonvoting bank presidents. Career backgrounds or political affiliations also affect individual forecast behavior. KEYWORDS FOMC, individual characteristics, individual forecasts, regional bias | INTRODUCTIONWe analyze the forecast determinants of Federal Open Market Committee (FOMC) members. Individual forecasts of key macroeconomic factors (such as unemployment and inflation rates) are crucial indicators for determining optimal monetary policy when a forward-looking policy rule is considered. 1 Since the FOMC is a committee consisting of 12 voting members (seven members of the Board of Governors (BoG) 2 and five voting regional Federal Reserve Bank presidents), disagreement about the optimal monetary policy stance (as shown in many studies) not only leads to dissenting votes in the FOMC but may also lead to dispersion of forecasts among FOMC members. Thus analyzing the determinants of real-time inflation and unemployment rate forecasts may improve our understanding of differences in the monetary policy preferences among FOMC members. This paper aims to analyze the determinants of FOMC members' individual inflation and unemployment rate forecasts in the period 1992-2004. We add to the existing literature not only by considering a broadest set of potential regional, individual, and political characteristics, but also by testing determinants (such as career backgrounds, electoral cycles, political affiliation) not previously considered in the FOMC forecasting literature. Our results indicate considerable differences in the economic forecasts between Governors and Bank presidents. Moreover, forecasts of Bank presidents are influenced by the unemployment rate in their 1 Haldane and Batini (1999), as well as Rudebusch and Svensson (1999), compare monetary policy rules and conclude that forward-looking rules including forecasts of inflation instead of actual values can improve monetary policy performance relative to a simple benchmark rule (such as proposed in Taylor, 1993). Clarida, Gali, and Gertler (1998) find that so-called G3 central banks (Germany, Japan, USA) implicitly have followed a type of inflation-targeting regime since 1979, and thus all three central banks indirectly applied a forward-looking framework. Orphanides (2003) find periods -such as during the 1970s or mid-1990s-when a forecast-based rule did an even better job in describing FOMC's monetary policy. Orphanides and Wieland (2008) use a forecast-based Taylor rule framework and conclude...

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“…One solution to this problem is to compute a measure of implied dissents in speech and add this data to observed dissents in votes. Using supplemental information from meeting transcripts, it is possible to identify those cases where members express dissent in the meeting deliberations but refrain from doing so o cially when the actual roll call vote is cast (Chappell et al, 2000;Eij nger et al, 2017;El-Shagi and Jung, 2015). With the inclusion of more cases, this measurement strategy leads to a greater numbers of dissents and relaxes some of the problems associated with sparse data.…”

Section: Central Bank Preferencesmentioning

confidence: 99%

A textual Taylor rule: estimating central bank preferences combining topic and scaling methods

Baerg

Lowe

2018

PSRM

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Scholars o en use voting data to estimate central bankers' policy preferences but consensus voting is commonplace. To get around this, we combine topic-based text analysis and scaling methods to generate theoretically motivated comparative measures of central bank preferences on the U.S. Federal Open Market Commi ee leading up to the nancial crisis in a way that does not depend on voting behavior. We apply these measures to a number of applications in the literature. For example, we nd that FOMC members that are Federal Reserve Bank Presidents from districts experiencing higher unemployment are also more likely to emphasize unemployment in their speech. We also con rm that commi ee members on schedule to vote are more likely to express consensus opinion than their o schedule voting counterparts.

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Does the Greenspan era provide evidence on leadership in the FOMC?

Cited by 21 publications

References 62 publications

Do federal reserve bank presidents have a regional bias?

Do federal reserve bank presidents have a regional bias?

Regional, individual and political determinants of FOMC members' key macroeconomic forecasts

A textual Taylor rule: estimating central bank preferences combining topic and scaling methods

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