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Do Federal Reserve presidents communicate with a regional bias?

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  • Hayo, Bernd
  • Neuenkirch, Matthias

Abstract

In this paper, we analyze the determinants of US monetary policy stance as expressed in speeches by Federal Reserve (Fed) officials over the period January 1998–September 2009. Econometrically, we use a probit model with regional and national macroeconomic variables to explain the content of these speeches. Our results are, first, that a rise in the inflation rate or the Leading Index makes a hawkish speech more likely. Second, when Fed presidents make a speech in their home district, its content is influenced by both regional and national macroeconomic variables, whereas speeches given outside the home district are influenced solely by national information. Third, the influence of regional variables increases during (i) Ben Bernanke’s tenure as Fed Chairman, (ii) recessions, and (iii) the financial crisis. Finally, speeches by nonvoting presidents reflect regional economic development to a greater extent than those by voting presidents.

Suggested Citation

  • Hayo, Bernd & Neuenkirch, Matthias, 2013. "Do Federal Reserve presidents communicate with a regional bias?," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 62-72.
  • Handle: RePEc:eee:jmacro:v:35:y:2013:i:c:p:62-72
    DOI: 10.1016/j.jmacro.2012.10.002
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    Cited by:

    1. Jung, Alexander, 2016. "Have minutes helped to predict fed funds rate changes?," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 18-32.
    2. Jung, Alexander & Latsos, Sophia, 2015. "Do federal reserve bank presidents have a regional bias?," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 173-183.
    3. Lähner, Tom, 2015. "Inconsistent voting behavior in the FOMC," Hannover Economic Papers (HEP) dp-546, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    4. Bernd Hayo & Guillaume Méon, 2012. "Why Countries Matter for Monetary Policy Decision-Making in the ESCB," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(1), pages 21-26, 04.
    5. El-Shagi, Makram & Jung, Alexander, 2015. "Does the Greenspan era provide evidence on leadership in the FOMC?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 173-190.
    6. A. Jung, 2013. "Policymakers’ Interest Rate Preferences: Recent Evidence for Three Monetary Policy Committees," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 150-197, September.
    7. Bernd Hayo & Ummad Mazhar, 2014. "Monetary Policy Committee Transparency: Measurement, Determinants, and Economic Effects," Open Economies Review, Springer, vol. 25(4), pages 739-770, September.
    8. Eichler, Stefan & Lähner, Tom & Noth, Felix, 2016. "Regional Banking Instability and FOMC Voting," Annual Conference 2016 (Augsburg): Demographic Change 145803, Verein für Socialpolitik / German Economic Association.
    9. Bernd Hayo & Pierre-Guillaume Méon, 2013. "Behind closed doors: Revealing the ECB’s decision rule," Post-Print CEB, ULB -- Universite Libre de Bruxelles, vol. 37, pages 135-160, October.
    10. Hamza Bennani & Tobias Kranz & Matthias Neuenkirch, 2017. "Disagreement Between the FOMC and the Fed's Staff: New Insights Based on a Counterfactual Interest Rate," Research Papers in Economics 2017-10, University of Trier, Department of Economics.
    11. Hamza Bennani & Matthias Neuenkirch, 2017. "The (home) bias of European central bankers: new evidence based on speeches," Applied Economics, Taylor & Francis Journals, vol. 49(11), pages 1114-1131, March.
    12. Jung, Alexander, 2016. "Have FOMC minutes helped markets to predict FED funds rate changes?," Working Paper Series 1961, European Central Bank.
    13. repec:eee:jbfina:v:87:y:2018:i:c:p:282-292 is not listed on IDEAS
    14. Bernd Hayo, 2014. "Granville, Brigitte: Remembering inflation," Journal of Economics, Springer, vol. 113(1), pages 97-100, September.
    15. David-Jan Jansen & Richhild Moessner, 2016. "Communicating dissent on monetary policy: Evidence from central bank minutes," DNB Working Papers 512, Netherlands Central Bank, Research Department.
    16. Jung, Alexander & El-Shagi, Makram, 2015. "Has the publication of minutes helped markets to predict the monetary policy decisions of the Bank of England's MPC?," Working Paper Series 1808, European Central Bank.
    17. Hamza Bennani, 2016. "Measuring Monetary Policy Stress for Fed District Representatives," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(2), pages 156-176, May.
    18. Bennani, Hamza & Farvaque, Etienne & Stanek, Piotr, 2018. "Influence of regional cycles and personal background on FOMC members’ preferences and disagreement," Economic Modelling, Elsevier, vol. 68(C), pages 416-424.
    19. Sheng, Xuguang (Simon), 2015. "Evaluating the economic forecasts of FOMC members," International Journal of Forecasting, Elsevier, vol. 31(1), pages 165-175.
    20. El-Shagi, Makram & Jung, Alexander, 2015. "Have minutes helped markets to predict the MPC's monetary policy decisions?," European Journal of Political Economy, Elsevier, vol. 39(C), pages 222-234.

    More about this item

    Keywords

    Central bank communication; Disagreement; Federal Reserve; Monetary policy; Regional representation; Speeches;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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