Local Monetary Policy

49 Pages Posted: 29 Mar 2024 Last revised: 3 Apr 2024

See all articles by Vyacheslav Fos

Vyacheslav Fos

Boston College - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Tommaso Tamburelli

Boston College - Carroll School of Management

Nancy R. Xu

Boston College, Carroll School of Management

Date Written: March 30, 2024

Abstract

When Federal Reserve districts experience high inflation but lack voting rights to influence FOMC decisions, Federal Reserve Banks reduce the amount of credit extended via the discount window (DW). The identification strategy is based on the exogenous rotation of voting rights among Reserve Banks and on within borrower-time and district-time variations in DW loans and Federal Home Loan Bank (FHLB) loans, implying that factors related to changes in local demand for credit or changes in borrower characteristics cannot drive the results. Our findings suggest the existence of local monetary policy (LMP) executed by the Federal Reserve Banks.

Keywords: Federal Reserve System, monetary policy, local economic conditions, voting rights, discount window loans

JEL Classification: E5, E51, E58, D7

Suggested Citation

Fos, Vyacheslav and Tamburelli, Tommaso and Xu, Nancy R., Local Monetary Policy (March 30, 2024). Available at SSRN: https://ssrn.com/abstract=4771838 or http://dx.doi.org/10.2139/ssrn.4771838

Vyacheslav Fos

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tommaso Tamburelli

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Nancy R. Xu (Contact Author)

Boston College, Carroll School of Management ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://www.nancyxu.net

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