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FOMC policy preferences and economic policy uncertainty

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  • Ellis, Michael A.
  • Liu, Dandan

Abstract

This paper studies the relationship between the individual monetary policy preferences of Federal Open Market Committee meeting participants and the private sector’s economic policy uncertainty. We find that an increase in economic policy uncertainty is associated with a preference for monetary policy easing, and this effect is in addition to any effect of policy uncertainty on inflation and output gap forecasts. We also show that the results are largely driven by presidents of Federal Reserve Banks, especially non-voting presidents of Federal Reserve Banks.

Suggested Citation

  • Ellis, Michael A. & Liu, Dandan, 2021. "FOMC policy preferences and economic policy uncertainty," Economics Letters, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521002147
    DOI: 10.1016/j.econlet.2021.109937
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    References listed on IDEAS

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    1. Alessandro Riboni & Francisco J. Ruge-Murcia, 2008. "The Dynamic (In)Efficiency of Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(5), pages 1001-1032, August.
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    4. Peter Tillmann, 2020. "Monetary Policy Uncertainty and the Response of the Yield Curve to Policy Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(4), pages 803-833, June.
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    6. Joseph Vavra, 2014. "Inflation Dynamics and Time-Varying Volatility: New Evidence and an Ss Interpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 215-258.
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    8. Bordo, Michael D. & Duca, John V. & Koch, Christoffer, 2016. "Economic policy uncertainty and the credit channel: Aggregate and bank level U.S. evidence over several decades," Journal of Financial Stability, Elsevier, vol. 26(C), pages 90-106.
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    10. Firrell, Alastair & Reinold, Kate, 2020. "Uncertainty and voting on the Bank of England’s Monetary Policy Committee," Bank of England working papers 898, Bank of England.
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    12. Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2005. "Committee Decisions on Monetary Policy: Evidence from Historical Records of the Federal Open Market Committee," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033305, April.
    13. Ellis, Michael A. & Liu, Dandan, 2016. "FOMC forecasts and monetary policy deliberations," Economics Letters, Elsevier, vol. 147(C), pages 131-134.
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    Cited by:

    1. Gai, Prasanna & Haworth, Cameron, 2023. "Macroprudential policymakers with cautious expectations," Economics Letters, Elsevier, vol. 229(C).

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    More about this item

    Keywords

    Federal Open Market Committee; Economic policy uncertainty;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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