Voting Right Rotation, Behavior of Committee Members and Financial Market Reactions: Evidence from the U.S. Federal Open Market Committee

Michael Ehrmann, Robin Tietz and Bauke Visser

No 2022/105, IMF Working Papers from International Monetary Fund

Abstract: Which Federal Reserve Bank presidents vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: nonvoting presidents do attend and participate in the meetings of the committee. We test two hypotheses about the dependence of presidents' behavior on voting status. (i) Loss compensation: presidents compensate the loss of the right to vote with an increased use of speeches and contributions. (ii) Motivation: presidents complement the right to vote with an increased use of speeches and contributions. The evidence favors the motivation hypothesis. Also, in years that presidents vote, their speeches move financial markets less than in years they do not vote. We argue that this vote discount is consistent with presidents’ communication behavior.

Keywords: voting right rotation; monetary policy committee; central bank communication; FOMC; financial market response; motivation hypothesis; communication behavior; presidents vote; FOMC meeting; Fed president; voting status; Unemployment; Unemployment rate; Inflation; Financial sector; Asset prices (search for similar items in EconPapers)
Pages: 44
Date: 2022-05-27
New Economics Papers: this item is included in nep-cdm, nep-mon and nep-pol
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Citations: View citations in EconPapers (6)

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Working Paper: Voting right rotation, behavior of committee members and financial market reactions: evidence from the U.S. Federal Open Market Committee (2021)
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