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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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Universitätsstraße 25, 35037 Marburg

Phone: 06421/28-1722
Fax: 06421/28-4858
Web page: http://www.uni-marburg.de/fb02/
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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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References listed on IDEAS
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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. Chanont Banternghansa & Michael W. McCracken, 2009. "Forecast disagreement among FOMC members," Working Papers 2009-059, Federal Reserve Bank of St. Louis.
  21. Ellen E. Meade, 2005. "The FOMC: preferences, voting, and consensus," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 93-101.
Full references (including those not matched with items on IDEAS)

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
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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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. 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.
  10. Jung, Alexander, 2016. "Have FOMC minutes helped markets to predict FED funds rate changes?," Working Paper Series 1961, European Central Bank.
  11. Hamza Bennani & Matthias Neuenkirch, 2014. "The (Home) Bias of European Central Bankers: New Evidence Based on Speeches," Research Papers in Economics 2014-16, University of Trier, Department of Economics.
  12. Bernd Hayo, 2014. "Granville, Brigitte: Remembering inflation," Journal of Economics, Springer, vol. 113(1), pages 97-100, September.
  13. 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.
  14. 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.
  15. Sheng, Xuguang (Simon), 2015. "Evaluating the economic forecasts of FOMC members," International Journal of Forecasting, Elsevier, vol. 31(1), pages 165-175.
  16. 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.

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

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