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The making of hawks and doves

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  • Malmendier, Ulrike
  • Nagel, Stefan
  • Yan, Zhen

Abstract

Personal experiences of inflation strongly influence the hawkish or dovish leanings of central bankers. For all members of the Federal Open Market Committee (FOMC) since 1951, we estimate an adaptive learning rule based on their lifetime inflation data. The resulting experience-based forecasts have significant predictive power for members’ FOMC voting decisions, the hawkishness of the tone of their speeches, as well as the heterogeneity in their semi-annual inflation projections. Averaging over all FOMC members present at a meeting, inflation experiences also help to explain the federal funds target rate, over and above conventional Taylor rule components.

Suggested Citation

  • Malmendier, Ulrike & Nagel, Stefan & Yan, Zhen, 2021. "The making of hawks and doves," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 19-42.
    • Handle: RePEc:eee:moneco:v:117:y:2021:i:c:p:19-42
    DOI: 10.1016/j.jmoneco.2020.04.002
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    More about this item

    Keywords

    Monetary policy; Experience effects; Availability bias; Inflation forecasts; Federal funds rate;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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