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Did the fed raise interest rates before elections?

Alexander Dentler

Public Choice, 2019, vol. 181, issue 3, No 3, 239-273

Abstract: Abstract The literature on political business cycles focuses on elected incumbents and neglects the incentives of appointed officials. We present evidence of rate hikes before elections when the chair of the US Federal Reserve is from a different party than the incumbent president. This finding contrasts with the traditional belief that an inappropriate policy-rate bias implies a more expansive pre-election policy stance. We also find weak evidence that rates are lowered when the chair and president are from the same party. The evidence that ideological preferences of the chair matter remains even when we control for career motives.

Keywords: Political business cycle; Political monetary cycle; Central bank independence; Political appointments; Taylor rule (search for similar items in EconPapers)
JEL-codes: E32 E58 E61 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11127-019-00653-z

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Handle: RePEc:kap:pubcho:v:181:y:2019:i:3:d:10.1007_s11127-019-00653-z