The Taylor rule and the appointment cycle of the chairperson of the Federal Reserve

Gamber, Edward N.; Hakes, David R.

doi:10.1016/j.jeconbus.2005.05.004

Cited by 4 publications

(10 citation statements)

References 18 publications

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“…Reappointments of the chair require presidential approval, and we find that the federal funds rate is abnormally low when a reappointment decision is scheduled shortly after an election. Similar evidence is provided by Gamber and Hakes (2006). The RPMC becomes more evident when we control for the future job prospects of the chair, as the two underlying motives lead to opposing biases.…”

Section: Introductionsupporting

confidence: 63%

“…However, they report evidence of an abnormally expansionary monetary policy when the incumbent president and the chair are affiliated with the same party. Gamber and Hakes (2006) shows evidence of a lowered federal funds rate if the Fed chair stands for reappointment in the two years following a national election. Both contributions highlight the role of the chair and the need to refine the analysis of PMCs.…”

Section: Introductionmentioning

confidence: 99%

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Did the fed raise interest rates before elections?

Dentler

2019

Public Choice

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The literature on political business cycles focuses on elected incumbents and neglects the incentives of appointed officials. We present evidence of rate hikes before elections when the chair of the US Federal Reserve is from a different party than the incumbent president. This finding contrasts with the traditional belief that an inappropriate policy-rate bias implies a more expansive pre-election policy stance. We also find weak evidence that rates are lowered when the chair and president are from the same party. The evidence that ideological preferences of the chair matter remains even when we control for career motives.

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Section: Introductionsupporting

confidence: 63%

Section: Introductionmentioning

confidence: 99%

Did the fed raise interest rates before elections?

Dentler

2019

Public Choice

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“…In order to identify the effect of the president's political affiliation, the Fed's reaction function is assumed to follow a forward-looking policy rule based on a Taylor rule and similar to Gamber and Hakes (2006). The model is as follows:…”

Section: Model and Datamentioning

confidence: 99%

“…One concern in estimating the model is possible autocorrelation from the lagged dependent variable as errors in the previous period are likely to be carried over to the next period violating the OLS assumption E(e t , e t-1 ) = 0. To address this issue, we use the Prais-Winsten estimation method similar to Gamber and Hakes (2006) use of the Cochrane-Orcutt method.…”

Section: Model and Datamentioning

confidence: 99%

“…For example, Hakes (1990) suggests that presidents can influence monetary policy through fiscal policies, appointment of governors or even appointment of chairman and that Chairman Burns (1970)(1971)(1972)(1973)(1974)(1975)(1976)(1977)(1978) was particularly swayed by presidential influence. Gamber and Hakes (2006) estimate a policy rule for intra-term periods and find the Fed to be more tepid in their response in periods prior to a chairman's reappointment. The research presented in this article examines the Fed's reaction functions under the last three chairmen, with an eye towards how its reaction function differs under Republican and Democrat presidents.…”

mentioning

confidence: 99%

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Federal Reserve independence: the Fed Funds Rate under different regimes

Jones

Snyder

2014

Applied Economics Letters

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Searching for the Fed’s reaction function

Wölfel

Weber

2016

Empir Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Searching for the FED's Reaction Function AbstractThere is still some doubt about those economic variables that really matter for the FED's decisions. In comparison to other estimations, this study uses the approach of Bayesian Model Averaging (BMA). The estimations show that over the long run inflation, unemployment rates, and long-term interest rates are the crucial variables in explaining the Federal Funds Rate. In the other two estimation samples, also the federal deficit and M2 were of relevance. In addition, we present the best models in more detail. Finally, a model average is constructed via BMA. The model average substantially outperforms a simple Taylor rule.

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The Taylor rule and the appointment cycle of the chairperson of the Federal Reserve

Cited by 4 publications

References 18 publications

Did the fed raise interest rates before elections?

Did the fed raise interest rates before elections?

Federal Reserve independence: the Fed Funds Rate under different regimes

Searching for the Fed’s reaction function

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