FOMC members’ incentives to disagree: regional motives and background influences

We study determinants of individual FOMC members disagreement with the decided policy rate. Utilizing a novel dataset of macroeconomic indicators for the Fed districts and preferences revealed by FOMC members in the transcripts, we construct individual reaction functions for each member for the period 1994-2008. Then, we explain the gap between each member’s preferred rate and the adopted policy rate by individual background characteristics. First, we find that FOMC members tend to react to regional economic conditions, in particular the unemployment rate. Second, that Professors, and individuals holding a master degree or issued from either private or public sector have a higher propensity to disagree on the dovish side during the meetings, while female members as well as governors nominated by a Democrat President tend to disagree on the hawkish side (as compared to the “reference†member, who is a male, PhD holder, Regional Bank President with experience in the financial sector). Moreover, we show that, under Ben Bernanke, in a period a large economic uncertainty, the propensity to disagree increased for all types of members.