Deliberation and Oversight in Monetary Policy, 1976-2008

Abstract

The focus of this paper is on the relationship of the Federal Reserve vis-à-vis Congress, starting in the mid-1970s — the period of sustained high inflation — and ending in early 2008, thereby capturing the early days of the financial crisis. As part of a larger book project, this paper provides a bird’s eye view of the discourse in the House and Senate banking committees as they conducted oversight hearings on monetary policy from 1976 to 2008. We use automated textual analysis software to gauge (statistically and graphically) deliberation within these committee hearings, using the verbatim transcripts. We analyze in full (i.e., every word, every phrase) 61 hearings over the 33 year period in order to measure empirically the deliberative discourse by politicians and central bankers on US monetary policy over three decades. We examine (1) the themes that do (and do not) interest legislators when they question the Fed chairman; (2) how these themes have evolved over three decades; and (3) differences in focus between both the Fed chairman and legislators, and between Democrats and Republicans.

Keywords: monetary policy, Congress, Federal Reserve, oversight, central banking