When Bankers Go to Hail: Insights into Fed-Bank Interactions from Taxi Data

Abstract

We introduce taxi ridership between the Federal Reserve Bank of New York and large financial institutions headquartered in New York City as a novel proxy for Fed-bank face-to-face interactions. We document a negative relation between past Fed-bank interactions and future stock market returns, particularly on days around the Fed’s public announcements. We also find significantly elevated Fed-bank interactions immediately following the lifting of the FOMC blackout. Our findings suggest that the Fed increases its information gathering via face-to-face interactions when it possesses negative private information about the condition of the economy.

Keywords: The Federal Reserve, FOMC, Monetary policy; NY Fed, Taxi ridership

JEL Classification: E50, E52, G20