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Regional influences on U.S. monetary policy: some implications for Europe

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  • Ellen E. Meade
  • D. Nathan Sheets

Abstract

This paper looks at the monetary policy decisions of the U.S. Federal Reserve and asks whether those decisions have been influenced solely by national concerns, or whether regional factors have played a role. All of the Federal Reserve's policymakers have some regional identity, i.e., either their positions explicitly carry some regional affiliation or their region of origin is a factor that must be considered in the selection process. This research is relevant for the Fed, and it may also be relevant for Europe's fledgling central bank in Frankfurt. Critics have asserted that ECB policymakers have an incentive to base policy on national developments and respond to national political pressures. We find that Fed policymakers do take into account developments in regional unemployment when deciding monetary policy, and that these regional developments are more important for central bankers at the hub than in the spokes. These findings are robust to a variety of different specifications of the voting equation.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 721.

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Date of creation: 2002
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Handle: RePEc:fip:fedgif:721

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Keywords: Federal Open Market Committee ; European Central Bank ; Monetary policy;

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  1. Gildea, John A, 1992. "The Regional Representation of Federal Reserve Bank Presidents," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 215-25, May.
  2. Abrams, Richard K & Froyen, Richard & Waud, Roger N, 1980. "Monetary Policy Reaction Functions, Consistent Expectations, and the Burns Era," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(1), pages 30-42, February.
  3. Belden, Susan, 1989. "Policy Preferences of FOMC Members as Revealed by Dissenting Votes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(4), pages 432-41, November.
  4. Editors : & David Marsden & Hugh Stephenson, 2001. "Labour Law and Social Insurance in the New Economy: A Debate on the Supiot Report," CEP Discussion Papers dp0500, Centre for Economic Performance, LSE.
  5. Havrilesky, Thomas & Gildea, John A, 1992. " Reliable and Unreliable Partisan Appointees to the Board of Governors," Public Choice, Springer, vol. 73(4), pages 397-417, June.
  6. Alberto Alesina & Vittorio Grilli, 1991. "The European Central Bank: Reshaping Monetary Politics in Europe," NBER Working Papers 3860, National Bureau of Economic Research, Inc.
  7. Stephen Nickell & Luca Nunziata & Wolfgang Ochel & Glenda Quintini, 2001. "The Beveridge Curve, Unemployment and Wages in the OECD from the 1960s to the 1990s - Preliminary Version," CEP Discussion Papers dp0502, Centre for Economic Performance, LSE.
  8. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  9. Belden, Susan, 1991. "The Policy Preferences of FOMC Members as Revealed by Dissenting Votes: Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 429-32, August.
  10. Geoffrey M. B. Tootell, 1991. "Regional economic conditions and the FOMC votes of district presidents," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 3-16.
  11. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
  12. Havrilesky, Thomas & Gildea, John A, 1991. "The Policy Preferences of FOMC Members as Revealed by Dissenting Votes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(1), pages 130-38, February.
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