FOMC Members’ Incentives to Disagree: Regional Motives and Background Influences

National Bank of Poland Working Paper No. 221

36 Pages Posted: 7 Jul 2016

See all articles by Hamza Bennani

Hamza Bennani

Université Paris X Nanterre

Etienne Farvaque

University of Lille I - Department of Economics and Management; Lille Economie & Management (LEM) UMR 9221

Piotr Leszek Stanek

Cracow University of Economics

Date Written: November 3, 2015

Abstract

We study determinants of individual FOMC members disagreement with the decided policy rate. Utilizing a novel dataset of macroeconomic indicators for the Fed districts and preferences revealed by FOMC members in the transcripts, we construct individual reaction functions for each member for the period 1994-2008. Then, we explain the gap between each member’s preferred rate and the adopted policy rate by individual background characteristics. First, we find that FOMC members tend to react to regional economic conditions, in particular the unemployment rate. Second, that Professors, and individuals holding a master degree or issued from either private or public sector have a higher propensity to disagree on the dovish side during the meetings, while female members as well as governors nominated by a Democrat President tend to disagree on the hawkish side (as compared to the “reference” member, who is a male, PhD holder, Regional Bank President with experience in the financial sector). Moreover, we show that, under Ben Bernanke, in a period a large economic uncertainty, the propensity to disagree increased for all types of members.

Keywords: Transcripts, FOMC, Interest Rate, Individual Taylor Rule

JEL Classification: E43, E58, F36

Suggested Citation

Bennani, Hamza and Farvaque, Etienne and Stanek, Piotr Leszek, FOMC Members’ Incentives to Disagree: Regional Motives and Background Influences (November 3, 2015). National Bank of Poland Working Paper No. 221. Available at SSRN: https://ssrn.com/abstract=2805882 or http://dx.doi.org/10.2139/ssrn.2805882

Hamza Bennani (Contact Author)

Université Paris X Nanterre ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000
France

Etienne Farvaque

University of Lille I - Department of Economics and Management ( email )

Villeneuve D'Ascq Cedex, 59655
France

Lille Economie & Management (LEM) UMR 9221 ( email )

Lille
France

Piotr Leszek Stanek

Cracow University of Economics ( email )

ul. Rakowicka 27
Krakow
Poland

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