Working Paper: CEPR ID: DP14878
Authors: Alessandro Riboni; Francisco J. Rugemurcia
Abstract: Transcripts from the meetings of the Federal Open Market Committee (FOMC) show thatthe policy proposed by its chair is always adopted with a majority of votes and limited dissent.An interpretation of this observation is that the power of the chair vis-a-vis the other membersis so large that the policy selected by the committee is basically that preferred by the chair.Instead, this paper argues that the observation that the chair’s proposal is always approvedis an equilibrium outcome: the proposal passes because it is designed to pass and it does notnecessarily correspond to the policy preferred by the chair. We construct a model of inclusivevoting where the chair has agenda-setting powers to make the proposal that is initially putto a vote but is subject to an acceptance constraint that incorporates the preferences of themedian and the probability of counter-proposals. The model is estimated by the method ofmaximum likelihood using real-time data from FOMC meetings. Results for the full sampleand sub-samples for each chair between 1974 and 2008 show that the data prefer a version ofour model where the chair is moderately inclusive over a dictator model. Thus, the workings ofthe FOMC appear to be stable over time and no chair, regardless of personality and recognizedability, can deviate far from the median view.
Keywords: inclusive voting; agenda setting; consensus; FOMC; collective decision-making
JEL Codes: D7; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| chair's agenda-setting power (D72) | proposal's acceptance (D44) |
| acceptance constraint (median's preferences) (D81) | proposal's acceptance (D44) |
| chair's influence (D72) | proposal's acceptance (D44) |
| median's preferences (C52) | proposal's acceptance (D44) |
| shared power dynamics (D70) | stable decision-making processes (D70) |
| chair's proposals (D72) | accommodation of median's preferences (D79) |