Working Paper: NBER ID: w24650
Authors: Michael D. Bordo; Klodiana Istrefi
Abstract: An important and open question in monetary economics is how the Federal Reserve makes its policy decisions. We document that when an FOMC member was born, his/her educational background and the Committee’s changing hawk-dove composition have predictable effects on FOMC decisions. The odds of an FOMC member being a hawk are higher when he/she graduated from a university linked to the Chicago school of economics; on the other hand, a dove likely graduated from a university with strong Keynesian beliefs and was born during a period of high unemployment. These findings have implications for the choice of and confirmation of FOMC members.
Keywords: FOMC; monetary policy; hawks; doves; education
JEL Codes: E03; E50; E61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Timing of birth during high unemployment (J19) | Policy preferences (dove) (J18) |
| Graduation from freshwater university (Q22) | Policy preferences (hawk) (F52) |
| Graduation from saltwater university (Q22) | Policy preferences (dove) (J18) |
| Appointment by Republican president (I00) | Policy preferences (hawk) (F52) |
| Composition of FOMC (more hawks) (E52) | Deviations of federal funds rate from Taylor rule (E43) |
| Composition of FOMC (more doves) (E52) | Looser monetary policy (E52) |
| Educational background (A29) | Voting behavior of FOMC members (D72) |