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Rationale For Dissent: The Case Of Fomc Members

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  • SUSAN BELDEN

Abstract

This paper investigates monetary policymakers' rationale for dissent to test for a hypothesized difference in policy preferences between bank presidents and members of the Board of Governors. The paper analyzes the cited reasons for dissent, the identity of the dissenter, and uses multiple regression to make inferences regarding the differences. Examining the identity of dissenters and the given reasons for dissent yields four conclusions, (i) A broad base of bank presidents dissent for tighter policy because they want to control inflation by keeping monetary aggregates within targeted ranges. (ii) On the other hand, board members' dissent for tighter policy is dominated by one man–Henry Wallich—who apparently was disturbed by the inflationary outbreak during the late 1970s and early 1980s. (Hi) Several board members dissent for looser policy to stimulate the real economy, (iv) But only a few bank presidents, primarily from the Northeast, dissent for looser policy with the same objective. Regression analysis supports the assertion that bank presidents dissenting for tighter policy do so to keep monetary aggregates on target in order to control inflation. The analysis confirms Wallich's focus on inflation during the late 1970s and early 1980s. It also allows for the possibility that the various board members dissenting for looser policy either have an inherent preference for looser policy or have diverse reasons for dissent.

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  • Susan Belden, 1991. "Rationale For Dissent: The Case Of Fomc Members," Contemporary Economic Policy, Western Economic Association International, vol. 9(3), pages 59-70, July.
    • Handle: RePEc:bla:coecpo:v:9:y:1991:i:3:p:59-70
    DOI: 10.1111/j.1465-7287.1991.tb00341.x
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    1. Alesina, Alberto & Rosenthal, Howard, 1989. "Partisan Cycles in Congressional Elections and the Macroeconomy," American Political Science Review, Cambridge University Press, vol. 83(2), pages 373-398, June.
    2. Belden, Susan, 1989. "Policy Preferences of FOMC Members as Revealed by Dissenting Votes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(4), pages 432-441, November.
    3. Puckett, Richard H., 1984. "Federal open market committee structure and decisions," Journal of Monetary Economics, Elsevier, vol. 14(1), pages 97-104, July.
    4. Havrilesky, Thomas, 1988. "Monetary Policy Signaling from the Administration to the Federal Reserve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(1), pages 83-101, February.
    5. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
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