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The FOMC: preferences, voting, and consensus

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  • Ellen E. Meade

Abstract

In this paper, the author develops and uses an original dataset collected from the internal discussion of the Federal Reserve's monetary policy committee (the Federal Open Market Committee [FOMC] transcripts) to examine questions about the Committee's behavior. The data show that Chairman Alan Greenspan's proposals, after Committee discussion, were nearly always adopted unmodified in the formal vote. Despite the external appearance of consensus with little disagreement over decisions and an official dissent rate of 7.5 percent, the data reveal that the rate of disagreement in internal Committee discussions was quite high-on the order of 30 percent for discussions of the short-term interest rate. And, under the assumption that FOMC voters assigned a higher priority to their preferences for the short-term interest rate than for the bias in the policy directive, it can be shown that this bias was important for achieving consensus, which supports and extends the results of Thornton and Wheelock (2000). Thus, the novel dataset described in this paper helps to shed some light on the internal workings of the FOMC in the Greenspan years.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2005)
Issue (Month): Mar ()
Pages: 93-101

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Handle: RePEc:fip:fedlrv:y:2005:i:mar:p:93-101:n:v.87no.2,pt.1

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Keywords: Federal Open Market Committee ; Monetary policy;

References

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  1. James D. Hamilton & Oscar Jorda, 2002. "A Model of the Federal Funds Rate Target," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(5), pages 1135-1167, October.
  2. Daniel L. Thornton, 2005. "When did the FOMC begin targeting the federal funds rate? what the verbatim transcripts tell us," Working Papers, Federal Reserve Bank of St. Louis 2004-015, Federal Reserve Bank of St. Louis.
  3. Bernanke, Ben S. & Mihov, Ilian, 1995. "Measuring Monetary Policy," Economics Series, Institute for Advanced Studies 10, Institute for Advanced Studies.
  4. Meade, Ellen E & Sheets, D Nathan, 2005. "Regional Influences on FOMC Voting Patterns," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 37(4), pages 661-77, August.
  5. Sarantis Kalyvitis & Alexander Michaelides, 2001. "New evidence on the effects of US monetary policy on exchange rates," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 197, London School of Economics and Political Science, LSE Library.
  6. Kalyvitis, Sarantis & Michaelides, Alexander, 2001. "New evidence on the effects of US monetary policy on exchange rates," Economics Letters, Elsevier, Elsevier, vol. 71(2), pages 255-263, May.
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Citations

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Cited by:
  1. Otto H. Swank & Bauke Visser, 2008. "Is Transparency to No Avail? Committee Decision-Making, Pre-Meetings, and Credible Deals," Economics Working Papers, European University Institute ECO2008/18, European University Institute.
  2. Claussen, Carl Andreas & Matsen, Egil & Røisland, Øistein & Torvik, Ragnar, 2012. "Overconfidence, monetary policy committees and chairman dominance," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 81(2), pages 699-711.
  3. Peter Tillmann, 2010. "Strategic Forecasting on the FOMC," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201017, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Riboni, Alessandro & Ruge-Murcia, Francesco, 2011. "Dissent in Monetary Policy Decisions," Economics Papers from University Paris Dauphine 123456789/7718, Paris Dauphine University.
  5. Ellen E. Meade & Daniel L. Thornton, 2010. "The Phillips curve and US monetary policy: what the FOMC transcripts tell us," Working Papers, Federal Reserve Bank of St. Louis 2010-017, Federal Reserve Bank of St. Louis.
  6. Etienne Farvaque & Hakim Hammadou & Piotr Stanek, 2011. "Selecting Your Inflation Targeters: Background and Performance of Monetary Policy Committee Members," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 12(2), pages 223-238, 05.
  7. Job Swank & Otto Swank & Bauke Visser, 2006. "Transparency and Pre-meetings," Tinbergen Institute Discussion Papers 06-051/1, Tinbergen Institute.
  8. Jung, Alexander & Kiss, Gergely, 2012. "Preference heterogeneity in the CEE inflation-targeting countries," European Journal of Political Economy, Elsevier, vol. 28(4), pages 445-460.
  9. Fendel, Ralf & Rülke, Jan-Christoph, 2012. "Are heterogeneous FOMC forecasts consistent with the Fed’s monetary policy?," Economics Letters, Elsevier, Elsevier, vol. 116(1), pages 5-7.
  10. Christopher Crowe & Ellen E. Meade, 2007. "The Evolution of Central Bank Governance around the World," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(4), pages 69-90, Fall.
  11. Daniel Seidmann, 2011. "A theory of voting patterns and performance in private and public committees," Social Choice and Welfare, Springer, Springer, vol. 36(1), pages 49-74, January.
  12. Alexander Jung & Gergely Kiss, 2012. "Voting by monetary policy committees: evidence from the CEE inflation-targeting countries," MNB Working Papers, Magyar Nemzeti Bank (the central bank of Hungary) 2012/2, Magyar Nemzeti Bank (the central bank of Hungary).
  13. Ellen Meade, 2006. "Dissent and Disagreement on the Fed's FOMC: Understanding Regional Affiliations and limits to Transparency," DNB Working Papers, Netherlands Central Bank, Research Department 094, Netherlands Central Bank, Research Department.
  14. Gerlach-Kristen, Petra, 2008. "Taking two steps at a time: On the optimal pattern of policy interest rates," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(2), pages 550-570, February.

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