Abstract
A number of recent studies have analyzed whether there is a political influence on monetary policy, focusing primarily on whether monetary policy becomes “easier” just prior to elections. In addition to exploring whether there exists an election period cycle in monetary policy, this article explores the existence of another political influence on policy. Following up on some recent anecdotal evidence provided by John T. Woolley, this article explores whether incumbent FED chairmen have succeeded in influencing monetary policy in order to improve their reappointment chances. The analysis, which spans the administrations of seven U.S. presidents and four FED chairmen, finds no conclusive evidence that FED policy changes systematically either before elections or chairman reappointment dates. The analysis has implications for the issue of rules versus discretion in monetary policy.
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Ersenkal, C., Wallace, M.S. & Warner, J.T. Chairman reappointments, presidential elections and policy actions of the federal reserve. Policy Sci 18, 211–225 (1985). https://doi.org/10.1007/BF00138909
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DOI: https://doi.org/10.1007/BF00138909