Advertisement

The Power of Appointment and Monetary Policy

  • Thomas Havrilesky

Abstract

Previous chapters show that the Administration, Congress, and the banking industry signal their desires for monetary policy to Federal Reserve leaders and that these leaders periodically systematically respond. Nevertheless, even during the most blatant interludes of monetary policy signaling, Federal Reserve officials seldom complain publicly. They understand that politicians and bankers usually know where to draw the line. Politicians and bankers are aware of the private costs of too frequently appearing to pressure the Fed and central bankers and are aware of the private costs of appearing to succumb to these pressures. These costs arise because all signaling challenges central bank autonomy and, if excessive, threatens the symbiotic balance between the Administration, Congress and the financial services sector, as uncooperative principals on the one hand, and Federal Reserve officials, as agents on the other hand (see, for example, Alt 1991, or Woolley 1984). As seen in Chapter Six, the frequency of signaling is highly variable over time, depending on the degree of economic stress, interest group pressures because of that stress, and the viability of other means of influencing policy.2

Keywords

Monetary Policy Federal Reserve Vote Behavior Opposition Party Federal Reserve System 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alesina, Alberto, and Jeffrey Sachs. “Political Parties and the Business Cycle in the United States, 1948–1984”, Journal of Money, Credit and Banking 10 (February 1988), 63–82.CrossRefGoogle Scholar
  2. Alt, James. “Leaning into the Wind or Ducking out of the Storm? U.S. Monetary Policy in the 1980s.” In A. Alesina and G. Carliner, (eds.), Politics and Economics in the 1980s ( Chicago: University of Chicago Press, 1991 ).Google Scholar
  3. Auerbach, Robert D. “Institutional Preservation at the Federal Reserve,” Contemporary Policy Issues (July 1991), 46–58.Google Scholar
  4. Burns, Arthur. “Statement to Congress,” Federal Reserve Bulletin 63, March 1977, 238–246.Google Scholar
  5. Chappell, Henry, Thomas Havrilesky and Rob McGregor. “Partisan Monetary Policies: Presidential Impact Through the Power of Appointment,” Quarterly Journal of Economics (forthcoming 1993 ).Google Scholar
  6. Clifford, A. Jerome. The Independence of the Federal Reserve System ( Philadelphia: University of Pennsylvania Press, 1965 ).Google Scholar
  7. Federal Reserve. “Monetary Policy Objectives,” news release, July 13, 1988.Google Scholar
  8. Gildea, John. “FOMC Dissent Voting.” In Thomas Mayer (ed.), The Political Economy of American Monetary Policy ( New York: Cambridge University Press, 1990 ), 211–222.Google Scholar
  9. Goodfriend, M. “Monetary Mystique: Secrecy and Central Banking,” Journal of Monetary Economics 17 (January 1986), 63–92.CrossRefGoogle Scholar
  10. Greider, W. Secrets of the Temple. (New York: Simon and Schuster, 1987 ).Google Scholar
  11. Grier, Kevin T. “Congressional Influence on U.S. Monetary Policy: An Empirical Test,” Journal of Monetary Economics 28 (2) (October 1991), 201–220.CrossRefGoogle Scholar
  12. Havrilesky, Thomas. “A New Program for More Monetary Stability,” Journal of Political Economy 80 (January/February 1972), 171–175.Google Scholar
  13. Havrilesky, Thomas. “The Effect of the Federal Reserve ReformGoogle Scholar
  14. Reserve Banks,“ Social Science Quarterly 67 (June 1986), 393–401.Google Scholar
  15. Reserve Banks. “Monetary Policy Signaling from the Administration to the Federal Reserve,” Journal of Money, Credit and Banking 20 (February 1988), 83–101.CrossRefGoogle Scholar
  16. Reserve Banks. “The Influence of the Federal Advisory Council on Monetary Policy,” Journal of Money, Credit and Banking 22 (February 1990a), 37–50.CrossRefGoogle Scholar
  17. Reserve Banks. “Distributive Conflict and Monetary Policy,” Contemporary Policy Issues 8 (April 1990b), 50–61.CrossRefGoogle Scholar
  18. Reserve Banks. “The Federal Reserve Chairman as Hero: Our Defense Against Monetary Excesses?” Cato Journal 11 (Fall 1991), 65–72.Google Scholar
  19. Reserve Banks, and John Gildea. “Reliable and Unreliable Partisan Appointees to the Board of Governors,” Public Choice 73 (May 1992), 397–417.CrossRefGoogle Scholar
  20. Reserve Banks, and Robert Schweitzer. “A Theory of FOMC Dissent Voting with Evidence from the Time Series.” In Thomas Mayer (ed.), The Political Economy of American Monetary Policy ( New York: Cambridge University Press, 1990 ), 192–210.Google Scholar
  21. Hetzel, Robert L. “The Political Economy of Monetary Policy.” In Thomas Mayer (ed.), The Political Economy of American Monetary Policy, ( New York: University Press, 1990 ), 99–114.Google Scholar
  22. Hibbs, Douglas. The American Political Economy. ( Cambridge: Harvard University Press, 1987 ).Google Scholar
  23. Janis, Irving. Group Think. ( Boston: Houghton-Mifflin, 1983 ).Google Scholar
  24. Kane, Edward. “External Pressure and the Operation of the Fed.” In R.E. Lombra and W.E. Witte (eds.), Political Economy of International and Domestic Monetary Relations ( Ames: Iowa State University Press, 1982 ), 211–232.Google Scholar
  25. Kane, Edward. “The Impact of a New Federal Reserve Chairman,” Contemporary Policy Issues 6 (January 1988), 10–16.CrossRefGoogle Scholar
  26. Mayer, Thomas. “Minimizing Regret: Cognitive Dissonance as an Explanation of FOMC Behavior.” In Thomas Mayer (ed.), The Political Economy of American Monetary Policy. ( New York: University Press, 1990 ), 241–254.CrossRefGoogle Scholar
  27. Murray, Alan. “The New Fed: Democracy Comes to the Central Bank,” Wall Street Journal, April 5, 1991.Google Scholar
  28. Tootell, Geoffrey. “Are District Bank Presidents More Conservative Than Governors?” New England Economic Review (September/October 1991), 3–12.Google Scholar
  29. Waller, Christopher. “A Bargaining Model of Appointments to the Central Bank,” Journal of Monetary Economics 18 (July 1992).Google Scholar
  30. Wallich, Henry C. “Policy Research, Policy Advice and Policy-making.” In R. Lombra and W. Witte (eds.), Political Economy of International and Domestic Monetary Relations. ( Ames: Iowa State University Press, 1982 ).Google Scholar
  31. Weingast, Barry. “The Congressional Bureaucratic System: A Princi- pal Agent Perspective,” Public Choice 44 (1984), 147–191.CrossRefGoogle Scholar
  32. Willett, Thomas, and R. Burdekin. “Central Bank Reforms: The Federal Reserve in International Perspectives,” Public Budgeting and Financial Management (1991).Google Scholar
  33. Wood, John, and John Crihfield. “Another Look at Bureaucratic Incentives and Monetary Policy,” manuscript, 1991.Google Scholar
  34. Woolley, John T. Monetary Politics: The Federal Reserve and the Politics of Monetary Policy. ( New York: Cambridge University Press, 1984 ).CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 1993

Authors and Affiliations

  • Thomas Havrilesky
    • 1
  1. 1.Duke UniversityDurhamUSA

Personalised recommendations