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Network structures and heterogeneity in policy preferences at the FOMC

Author

Listed:
  • Bhattacharjee, Arnab
  • Holly, Sean
  • Wasseja, Mustapha

Abstract

Transcripts from the US Federal Open Markets Committee provide, albeit with a lag, valuable information on the monetary policymaking process at the Federal Reserve Bank. We use the data compiled by Chappell et al. (2005b) on preferred interest rates (not votes) of individual FOMC members. Together with information on which monetary policy decisions are based, we use these preferred rates to understand decision making in the FOMC, focussing both on cross-member heterogeneity and interaction among the members of the committee. Our contribution is to provide a method of unearthing otherwise unobservable interactions between the members of the FOMC. We find substantial heterogeneity in the policy reaction function across members. Further, we identify significant interactions between individuals on the committee. The nature of these interdependencies tell us something about information sharing and strategic interactions within the FOMC and provide interesting comparisons with the Bank of England's Monetary Policy Committee.

Suggested Citation

  • Bhattacharjee, Arnab & Holly, Sean & Wasseja, Mustapha, 2024. "Network structures and heterogeneity in policy preferences at the FOMC," Accountancy, Economics, and Finance Working Papers 2024-10, Heriot-Watt University, Department of Accountancy, Economics, and Finance.
    • Handle: RePEc:zbw:hwuaef:303042
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    More about this item

    Keywords

    Monetary policy; Interest rates; FOMC decision making; Spatial Weights Matrix; Spatial Lag Model;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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