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Do Federal Reserve Presidents Communicate with a Regional Bias?

Author Info

Listed author(s):
  • Bernd Hayo

    ()

    (Philipps-University Marburg)

  • Matthias Neuenkirch

    ()

    (Philipps-University Marburg)

Abstract

In this paper, we analyze the determinants of U.S. monetary policy stance as expressed in speeches by Federal Reserve (Fed) officials over the period January 1998 to 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 Fed governors and presidents follow a Taylor rule when expressing their opinions: a rise in inflation 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.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/03-2011_hayo.pdf
File Function: Third version, 2011
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201103.

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Length: 22 pages
Date of creation: 2011
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201103
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Phone: 06421/28-1722
Fax: 06421/28-4858
Web page: http://www.uni-marburg.de/fb02/
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More information through EDIRC

Keywords: Central Bank Communication; Disagreement; Federal Reserve; Monetary Policy; Regional Representation; Speeches;

Other versions of this item:

Find related papers by 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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  1. David Romer, 2010. "A New Data Set on Monetary Policy: The Economic Forecasts of Individual Members of the FOMC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 951-957, 08.
  2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
  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 432-441, November.
  4. Helge Berger & Jakob Haan, 2002. "Are small countries too powerful within the ECB?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(3), pages 263-282, September.
  5. Meade, Ellen E & Sheets, D Nathan, 2005. "Regional Influences on FOMC Voting Patterns," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 661-677, August.
  6. Hayo, Bernd & Méon, Pierre-Guillaume, 2013. "Behind closed doors: Revealing the ECB's decision rule," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 135-160.
  7. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  8. Belongia, Michael, 2009. "Reforming the Fed: what would real change look like?," MPRA Paper 18977, University Library of Munich, Germany, revised Dec 2009.
  9. Friedrich Heinemann & Felix P. Huefner, 2004. "Is The View From The Eurotower Purely European? - National Divergence And Ecb Interest Rate Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(4), pages 544-558, 09.
  10. Hayo, Bernd & Neuenkirch, Matthias, 2010. "Do Federal Reserve communications help predict federal funds target rate decisions?," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1014-1024, December.
  11. Tillmann, Peter, 2011. "Strategic forecasting on the FOMC," European Journal of Political Economy, Elsevier, vol. 27(3), pages 547-553, September.
  12. Petra Gerlach-Kristen & Ellen E. Meade, 2010. "Is There a Limit on FOMC Dissents? Evidence from the Greenspan Era," Working Papers 2010-16, American University, Department of Economics.
  13. Bernd Hayo & Ali M. Kutan & Matthias Neuenkirch, 2008. "Financial Market Reaction to Federal Reserve Communications: Does the Crisis Make a Difference?," MAGKS Papers on Economics 200808, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  14. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
  15. Ellen E. Meade, 2010. "Federal Reserve Transcript Publication And Regional Representation," Contemporary Economic Policy, Western Economic Association International, vol. 28(2), pages 162-170, 04.
  16. Michael Ehrmann & Marcel Fratzscher, 2007. "Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 509-541, 03.
  17. Havrilesky, Thomas & Gildea, John, 1995. "The Biases of Federal Reserve Bank Presidents," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 274-284, April.
  18. repec:pri:cepsud:161blinder is not listed on IDEAS
  19. Gildea, John A, 1992. "The Regional Representation of Federal Reserve Bank Presidents," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 215-225, May.
  20. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
  21. Chanont Banternghansa & Michael W. McCracken, 2009. "Forecast disagreement among FOMC members," Working Papers 2009-059, Federal Reserve Bank of St. Louis.
  22. Ellen E. Meade, 2005. "The FOMC: preferences, voting, and consensus," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 93-101.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. What influences Fed presidents?
    by Economic Logician in Economic Logic on 2011-03-25 14:22:00
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