Working Paper: CEPR ID: DP16213
Authors: Michael Ehrmann; Robin Tietz; Bauke Visser
Abstract: Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior.
Keywords: voting right; rotation; monetary policy committee; central bank communication; FOMC; financial market response
JEL Codes: D71; D72; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| voting right (K16) | involvement of presidents in decision-making processes (D70) |
| voting right (K16) | number of speeches (D72) |
| voting right (K16) | tone of interventions during meetings (E61) |
| voting right (K16) | responsiveness of speeches to regional economic conditions (R11) |
| non-voting years (K16) | expected increase in speech activity (O49) |
| voting right (K16) | market reaction to speeches (G14) |
| voting right (K16) | perception of information conveyed in speeches (D83) |