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Does the Greenspan era provide evidence on leadership in the FOMC?

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  • El-Shagi, Makram
  • Jung, Alexander

Abstract

The aim of this paper is to examine whether Chairman Greenspan influenced the Reserve Bank Presidents. This question is interesting, because it has been argued that their preferences would be more persistent compared to those of the Governors. We estimate individual Taylor-type reaction functions for the Federal Reserve Districts using their voiced interest rate preferences during the policy go-around as well as real-time economic information on the inflation and unemployment gap. A bootstrap analysis exploits information contained in these reaction functions and constructs counterfactual distributions of disagreement among the Federal Reserve Districts, assuming the absence of factors that could have enforced consensus. We compare these simulated distributions with the observed disagreement during the committee deliberations and find empirical evidence in favour of coordination. This detected coordination helped to bring the preferences of the Federal Reserve Districts more in line with Chairman Greenspan JEL Classification: C15, C53, D72, E58

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  • El-Shagi, Makram & Jung, Alexander, 2013. "Does the Greenspan era provide evidence on leadership in the FOMC?," Working Paper Series 1579, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20131579
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    Cited by:

    1. Jung, Alexander, 2016. "Have minutes helped to predict fed funds rate changes?," Journal of Macroeconomics, Elsevier, pages 18-32.
    2. Riboni, Alessandro & Ruge-Murcia, Francisco, 2014. "Dissent in monetary policy decisions," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 137-154.
    3. 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.
    4. El-Shagi, Makram & Jung, Alexander, 2015. "Does the Greenspan era provide evidence on leadership in the FOMC?," Journal of Macroeconomics, Elsevier, pages 173-190.
    5. 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.
    6. Eichler, Stefan & Lähner, Tom & Noth, Felix, 2016. "Regional Banking Instability and FOMC Voting," IWH Discussion Papers 15/2016, Halle Institute for Economic Research (IWH).
    7. Granziera, Eleonora & Hubrich, Kirstin & Moon, Hyungsik Roger, 2014. "A predictability test for a small number of nested models," Journal of Econometrics, Elsevier, pages 174-185.
    8. repec:eee:jbfina:v:80:y:2017:i:c:p:33-50 is not listed on IDEAS
    9. El-Shagi, Makram & Jung, Alexander, 2015. "Does the Greenspan era provide evidence on leadership in the FOMC?," Journal of Macroeconomics, Elsevier, pages 173-190.
    10. Sylvester Eijffinger & Ronald Mahieu & Louis Raes, 2016. "Monetary Policy Committees, Voting Behavior and Ideal Points," BAFFI CAREFIN Working Papers 1628, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    11. Aldasoro, Iñaki & Alves, Iván, 2015. "Multiplex interbank networks and systemic importance: An application to European data," SAFE Working Paper Series 102 [rev.], Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

    More about this item

    Keywords

    bootstrap.; Federal Reserve Districts; Greenspan era; individual reaction functions; real-time data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • 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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