(Hawks versus Doves) versus (Rules versus Discretion)

37 Pages Posted: 17 Mar 2020 Last revised: 9 Jun 2021

See all articles by Klodiana Istrefi

Klodiana Istrefi

Banque de France; Centre for Economic Policy Research (CEPR)

Alex Nikolsko‐Rzhevskyy

Lehigh University - Business School

David H. Papell

University of Houston - Department of Economics

Ruxandra Prodan-Boul

Stanford University - Department of Economics

Date Written: February 17, 2020

Abstract

The conduct of monetary policy is often characterized by either “hawks versus doves” or “rules versus discretion”. Looking at the 1965 to 2015 period, we show that better economic performance occurs when members of the Federal Open Market Committee are more concerned about inflation than unemployment (hawkish) and/or the Fed closely follows a policy rule (rules-based). Moreover, the economy performs better in periods of either strong hawkish or dovish majorities than when majorities are weak. While it is more important to follow a policy rule than to have a hawkish Committee, it is better to have a policy rule with a hawkish than with a dovish Committee.

Keywords: Monetary Policy, Federal Reserve, Policy Preferences, Rules, Discretion

JEL Classification: E52, E58

Suggested Citation

Istrefi, Klodiana and Nikolsko-Rzhevskyy, Alex and Papell, David H. and Prodan-Boul, Ruxandra, (Hawks versus Doves) versus (Rules versus Discretion) (February 17, 2020). Available at SSRN: https://ssrn.com/abstract=3540831 or http://dx.doi.org/10.2139/ssrn.3540831

Klodiana Istrefi (Contact Author)

Banque de France ( email )

Paris
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Alex Nikolsko-Rzhevskyy

Lehigh University - Business School ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

HOME PAGE: http://www.nikolsko-rzhevskyy.com

David H. Papell

University of Houston - Department of Economics ( email )

Houston, TX 77204-5882
United States

Ruxandra Prodan-Boul

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
STANFORD, CA 94305-6072
United States

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