The Pressures on American Monetary Policy

This paper investigates persuasion as a means of influence for the Federal Reserve Chairman in meetings of the Federal Open Market Committee (FOMC). Using textual records of FOMC meetings, federal funds rate targets have been recorded for Committee members who served in the Arthur Burns era (1970–1978). Results show that Burns-member differences in stated funds rate targets were lower when Burns made recommendations early in the meeting, consistent with the hypothesis that the Chairman is persuasive. Additional results show that members’ tendencies to respond to Burns's recommendations were related to their personal and political loyalties. Copyright Springer Science+Business Media, LLC 2007Federal Open Market Committee, FOMC, Monetary policy, Federal Reserve,

Section: Data From the Textual Records Of Fomc Deliberationssupporting

confidence: 91%

The persuasive power of a Committee Chairman: Arthur Burns and the FOMC

Chappell

McGregor²,

Vermilyea

2007

“…8. See Shughart and Tollison (1983), Poole (1990), and Havrilesky (1995). The Korean bureaucracy has been well known for its extraordinary level and scope of discretionary power and organizational cohesiveness.…”

Section: Notesmentioning

confidence: 99%

“…They act as agents to the legislature, but, with significant rule-making influence, capture some of the wealth, or raise transaction costs for the principal and other competitorsà la Breton and Wintrobe (1982). In fact, the central bank's selfinterest in monetary policy has been noted for long time (Havrilesky, 1995). This paper addresses the exchange rate regime from the forementioned endogeneity perspective, following the proposition that most changes in government policy involve special interests hiding beneath the veneer.…”

Section: Introductionmentioning

confidence: 98%

Endogenous changes in the exchange rate regime: A bureaucratic incentive model

Kim

2005

Public choice submits that legal changes can be endogenous in such a way that they are manipulated by bureaucrats who want to maximize rents from transactions with various interest groups. This paper takes the change in exchange rate regimes to empirically examine the premise. It offers a two-stage method, in which we first show that the exchange rate is influenced by interest group pressures, and subsequently that the 1990 market average regime (MAR), as a phase-in policy in Korea, was introduced mainly to serve bureaucratic incentives. This method is expected to be useful to a host of countries for various studies attempting to test a possible existence of bureaucratic or other hidden motivations behind any “isolated'' event of policy change. Copyright Springer Science + Business Media, Inc. 2005

“…One factor that is not explored within this study is congressional influence on FOMC consensual decision making. Though Grier (1991) and Havrilesky (1993) each assert that congressional oversight of monetary policy is motivated by a strong electoral incentive to keep interest rates from becoming too high, it is not relevant to the study of general consensual behavior of FOMC members.5 The central theme of this paper deals with the heterogeneity of bureaucratic agents, as reflected by the formal and informal aspects that influence their consensual behavior on the FOMC, not the substantive content of monetary policy actions. 6…”

Section: Hypothesesmentioning

confidence: 99%

Agent heterogeneity and consensual decision making on the Federal Open Market Committee

Krause

1996

The consensual aspects of decision making are essential for understanding policy made by administrative organizations that take the form of a commision or board. Consensual decision making reflects the degree of policy cohesion exhibited by high-level officials within administrative organizations. It is proposed here that this type of behavior may differ between heterogeneous agents. The Federal Open Market Committee (FOMC) of the Federal Reserve System serves as a salient setting for testing these propositions in a time series context. The empirical results indicate that major intra-institutional differences exist between Board of Governor (BOG) and Regional Bank President (RBP) members of the Federal Open Market Committee (FOMC) regarding consensual behavior. In terms of policy decision making, the econometric evidence clearly demonstrates that the consensual behavior of these agents are fundamentally different from one another. This in turn has important implications for the study of other commission and board policy making bodies that consist of agents who are not all homogeneous.