Abstract
This paper develops a Federal Reserve reaction function which relates policy intentions to forecasts of policy objectives. Pre- and postpresidential election estimates of this reaction function for the post-Accord period of 1953–1984 suggest two conclusions:
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(1)
the Federal Reserve reacts differently to economic conditions in the pre- and postelection biennia and
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(2)
these differences in Fed behavior are not likely the result of partisan political influence, but rather the result of self-restraint by the Fed during preelection periods.
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I would like to thank Professor Dudley Luckett and Brian Gibson for helpful comments. I would also like to thank Myles Wallace and John Warner for providing the policy classifications.
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Hakes, D.R. Monetary policy and presidential elections: A nonpartisan political cycle. Public Choice 57, 175–182 (1988). https://doi.org/10.1007/BF00052404
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DOI: https://doi.org/10.1007/BF00052404