By Kelly H. Chang
Targeting how the President and the Senate effect financial coverage through appointing Federal Reserve Board contributors, this ebook solutions 3 questions about the appointment technique and its results. First, do politicians impression financial coverage through Federal Reserve appointments? moment, who impacts the process--only the President or the President and the Senate? 3rd, how is the constitution of the Federal Reserve appointment approach defined? The research extends the research of the Federal Reserve Board to the eu principal financial institution.
Read Online or Download Appointing Central Bankers: The Politics of Monetary Policy in the United States and the European Monetary Union (Political Economy of Institutions and Decisions) PDF
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Additional resources for Appointing Central Bankers: The Politics of Monetary Policy in the United States and the European Monetary Union (Political Economy of Institutions and Decisions)
X12} in order of easier to tighter monetary policy. 1, the x’s for the FOMC members have been dropped for ease of explication. Range of possible outcomes. The range of possible outcomes is the range in which the president and Senate can move the FOMC median with a given single appointment. L is the lower limit, and H is the upper limit of the range. In this example, the president (P) and the Senate Banking Committee median (S) favor easier policy relative to the current status quo, SQ0. The appointment process begins with a retirement, y = x6.
Essentially the president and Senate can manipulate FOMC policy with their BOG appointments because the BOG members make up a majority of the FOMC. I assume that the president and Senate are perfectly informed about the preferences of current and future reserve bank presidents. Because reserve bank presidents often serve multiple ﬁve-year terms, and this system of rotation is ﬁxed, the assumption is reasonable. For example, the Philadelphia reserve bank president recently retired after nineteen years of service – nearly four consecutive terms.
In one very famous example, Nixon apparently pressured Burns to inﬂate the economy just before the 1972 Presidential election (Borins 1972; Maisel 1973). Although some, including Burns, have denied this charge, other examples (see Greider 1987; Havrilesky 1995: 35–6) and systematic evidence in the Political Business Cycle literature support presidential and/or party inﬂuence on monetary policy (Nordhaus 1975; Hibbs 1977; Beck 1982a, 1982b; Alesina 1987; Grier 1987; Rogoff and Sibert 1988; Alesina and Roubini 1990; Alesina and Rosenthal 1995).