The Making of Hawks and Doves: Inflation Experiences on the FOMC

62 Pages Posted: 19 Mar 2017

See all articles by Ulrike Malmendier

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Stefan Nagel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research; CESifo (Center for Economic Studies and Ifo Institute)

Zhen (Zach) Yan

Cornerstone Research

Multiple version iconThere are 2 versions of this paper

Date Written: March 2017

Abstract

We show that personal experiences of inflation strongly influence the hawkish or dovish leanings of central bankers. For all members of the Federal Open Market Committee (FOMC) since 1951, we estimate an adaptive learning rule based on their lifetime inflation data. The resulting experience-based forecasts have significant predictive power for members' FOMC voting decisions, the hawkishness of the tone of their speeches, as well as the heterogeneity in their semi-annual inflation projections. Averaging over all FOMC members present at a meeting, inflation experiences also help to explain the federal funds target rate, over and above conventional Taylor rule components.

Suggested Citation

Malmendier, Ulrike and Nagel, Stefan and Yan, Zhen, The Making of Hawks and Doves: Inflation Experiences on the FOMC (March 2017). NBER Working Paper No. w23228, Available at SSRN: https://ssrn.com/abstract=2935433

Ulrike Malmendier (Contact Author)

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Stefan Nagel

University of Chicago - Booth School of Business ( email )

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Zhen Yan

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