Disagreement Between FOMC Members and the Fed’s Staff: New Insights Based on a Counterfactual Interest Rate

Hamza Bennani, Tobias Kranz and Matthias Neuenkirch

Post-Print from HAL

Abstract: We examine the degree and sources of disagreement between the members of the Federal Open Market Committee (FOMC) and the Federal Reserve's (Fed's) staff about the appropriate policy rate for the period 1994–2012. For that purpose, we compute a recommended interest rate for the Fed's staff based on its own Greenbook forecasts and a time-varying monetary policy rule `a la Taylor (1993), and compare it with the actual target rate. First, we find that there has been internal disagreement between FOMC members and the Fed's staff about the appropriate policy rate. Second, we reveal that members with an occupational background in finance favor a relatively more hawkish monetary policy. In addition, a preference towards a tighter monetary policy is found under a Democratic President and during Alan Greenspan's tenure as the Fed's Chairman. Finally, higher oil prices, a low degree of uncertainty, and episodes of financial stability are also associated with higher interest rates as compared to the Fed staff's recommendation.

Keywords: [No; keyword; available] (search for similar items in EconPapers)
Date: 2018
Note: View the original document on HAL open archive server: https://hal.science/hal-01868010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of Macroeconomics, 2018, 58, pp.139-153

Downloads: (external link)
https://hal.science/hal-01868010/document (application/pdf)

Related works:
Journal Article: Disagreement between FOMC members and the Fed’s staff: New insights based on a counterfactual interest rate (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01868010

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().