The Making of Hawks and Doves

72 Pages Posted: 29 Jun 2020

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 Yan

Cornerstone Research

Date Written: June 2020

Abstract

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.

Keywords: Availability bias, Experience effects, Federal Funds Rate, Inflation forecasts, monetary policy

JEL Classification: D84, E03, E50

Suggested Citation

Malmendier, Ulrike and Nagel, Stefan and Yan, Zhen, The Making of Hawks and Doves (June 2020). CEPR Discussion Paper No. DP14938, Available at SSRN: https://ssrn.com/abstract=3638042

Ulrike Malmendier (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER)

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Stefan Nagel

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Zhen Yan

Cornerstone Research ( email )

1000 El Camino Real
Menlo Park, CA 94025-4327
United States

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