Do Federal Reserve Presidents Communicate with a Regional Bias?
MAGKS Discussion Paper No. 03-2011
22 Pages Posted: 13 Feb 2011 Last revised: 14 Jul 2012
Date Written: July 13, 2012
In this paper, we analyze the determinants of U.S. monetary policy stance as expressed in speeches by Federal Reserve (Fed) officials over the period January 1998 to September 2009. Econometrically, we use a probit model with regional and national macroeconomic variables to explain the content of these speeches. Our results are, first, that Fed governors and presidents follow a Taylor rule when expressing their opinions: a rise in inflation or the Leading Index makes a hawkish speech more likely. Second, when Fed presidents make a speech in their home district, its content is influenced by both regional and national macroeconomic variables, whereas speeches given outside the home district are influenced solely by national information. Third, the influence of regional variables increases during (i) Ben Bernanke’s tenure as Fed Chairman, (ii) recessions, and (iii) the financial crisis. Finally, speeches by nonvoting presidents reflect regional economic development to a greater extent than those by voting presidents.
Keywords: Central Bank Communication, Disagreement, Federal Reserve, Monetary Policy, Regional Representation, Speeches
JEL Classification: D72, E52, E58
Suggested Citation: Suggested Citation