Committee Decisions on Monetary Policy: Evidence From Historical Records of the Federal Open Market Committee

2010 ◽  
Author(s):  
Henry Chappell ◽  
Rob Roy McGregor ◽  
Todd A. Vermilyea
Keyword(s):  
Monetary Policy ◽  
Open Market ◽  
Historical Records ◽  
Federal Open Market Committee

scholarly journals The Effect of FOMC Votes on Financial Markets

2019 ◽  
Vol 101 (5) ◽  
pp. 921-932
Author(s):  
Carlos Madeira ◽  
João Madeira
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Financial Markets ◽  
Interest Rates ◽  
Stock Prices ◽  
Open Market ◽  
Federal Open Market Committee ◽  
2008 Financial Crisis ◽  
Treasury Securities ◽  
Stock Market Reaction

This paper shows that since votes of members of the Federal Open Market Committee have been included in press statements, stock prices increase after the announcement when votes are unanimous but fall when dissent (which typically is due to preference for higher interest rates) occurs. This pattern started prior to the 2007–2008 financial crisis. The differences in stock market reaction between unanimity and dissent remain, even controlling for the stance of monetary policy and consecutive dissent. Statement semantics also do not seem to explain the documented effect. We find no differences between unanimity and dissent with respect to impact on market risk and Treasury securities.

Central Bank Communications

2019 ◽  
pp. 262-286
Author(s):  
J. Scott Davis ◽  
Mark A. Wynne
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Open Market ◽  
Monetary Policy Shocks ◽  
Federal Open Market Committee ◽  
Quarter Century ◽  
The Past ◽  
Policy Shocks ◽  
Monetary Policy Shock ◽  
Daily Time

Over the past twenty-five years, central bank communications have undergone a major revolution. Central banks that previously shrouded themselves in mystery now embrace social media to get their message out to the widest audience. The volume of information about monetary policy that the Federal Open Market Committee (FOMC) now releases dwarfs what it was releasing a quarter century ago. This chapter focuses on just one channel of FOMC communications, the postmeeting statement. It documents how this has become more detailed over time. Then daily financial-market data are used to estimate a daily time series of US monetary policy shocks. These shocks on Fed statement release days have gotten larger as the statement has gotten longer and more detailed, and the chapter shows that the length and complexity of the statement have a direct effect on the size of the monetary policy shock following a Fed decision.

Does Deliberation Matter in FOMC Monetary Policymaking? The Volcker Revolution of 1979

2008 ◽  
Vol 16 (4) ◽  
pp. 404-427 ◽  
Author(s):  
Andrew Bailey ◽  
Cheryl Schonhardt-Bailey
Keyword(s):  
Monetary Policy ◽  
Policy Decision ◽  
Decision Makers ◽  
Open Market ◽  
Credible Commitment ◽  
Federal Open Market Committee ◽  
Automated Content Analysis ◽  
High Inflation ◽  
The Face ◽  
Policy Shift

In monetary policy, decision makers seek to influence the expectations of agents in ways that can avoid making abrupt, dramatic, and unexpected decisions. Yet in October 1979, Chairman Paul Volcker led the Federal Reserve's Federal Open Market Committee (FOMC) unanimously to shift its course in managing U.S. monetary policy, which in turn eventually brought the era of high inflation to an end. Although some analysts argue that “the presence and influence of one individual”—namely, Volcker—is sufficient to explain the policy shift, this overlooks an important feature of monetary policymaking. FOMC chairmen—however, omnipotent they may appear—do not act alone. They require the agreement of other committee members, and in the 1979 revolution, the decision was unanimous. How, then, did Chairman Volcker manage to bring a previously divided committee to a consensus in October 1979, and moreover, how did he retain the support of the committee throughout the following year in the face of mounting political and economic pressure against the Fed? We use automated content analysis to examine the discourse of the FOMC (with this discourse recorded in the verbatim transcripts of meetings). In applying this methodology, we assess the force of the arguments used by Chairman Volcker and find that deliberation in the FOMC did indeed “matter” both in 1979 and 1980. Specifically, Volcker led his colleagues in coming to understand and apply the idea of credible commitment in U.S. monetary policymaking.

Inflation Thresholds and Policy-Rule Inertia: Some Simulation Results

FEDS Notes ◽  
2021 ◽  
Vol 2021 (2899) ◽  
Author(s):  
Cristina Fuentes-Albero ◽  
◽  
John M. Roberts ◽  
Keyword(s):  
Monetary Policy ◽  
Open Market ◽  
Policy Rule ◽  
Federal Open Market Committee ◽  
Policy Strategy ◽  
Forward Guidance ◽  
Key Features ◽  
Simulation Results ◽  
New Framework

In August 2020, the Federal Open Market Committee approved a revised Statement on Longer-Run Goals and Monetary Policy Strategy (FOMC, 2020) and in the subsequent FOMC meetings, the Committee made material changes to its forward guidance to bring it in line with the new framework. Clarida (2021) characterizes the new framework as comprising a number of key features.

scholarly journals How deviations from FOMC’s monetary policy decisions from a benchmark monetary policy rule affect bank profitability: evidence from U.S. banks

2017 ◽  
Vol 9 (4) ◽  
pp. 354-371
Author(s):  
Nicholas Apergis ◽  
Chi Keung Marco Lau
Keyword(s):  
Monetary Policy ◽  
Policy Decision ◽  
Open Market ◽  
Policy Decisions ◽  
Policy Rule ◽  
Federal Open Market Committee ◽  
Data Set ◽  
Content Type ◽  
Monetary Policy Rule ◽  
Banking Institutions

Purpose This paper aims to provide fresh empirical evidence on how Federal Open Market Committee (FOMC) monetary policy decisions from a benchmark monetary policy rule affect the profitability of US banking institutions. Design/methodology/approach It thereby provides a link between the literature on central bank monetary policy implementation through monetary rules and banks’ profitability. It uses a novel data set from 11,894 US banks, spanning the period 1990 to 2013. Findings The empirical findings show that deviations of FOMC monetary policy decisions from a number of benchmark linear and non-linear monetary (Taylor type) rules exert a negative and statistically significant impact on banks’ profitability. Originality/value The results are expected to have substantial implications for the capacity of banking institutions to more readily interpret monetary policy information and accordingly to reshape and hedge their lending behaviour. This would make the monetary policy decision process less noisy and, thus, enhance their capability to attach the correct weight to this information.

Political Pressures on Monetary Policy During the US Great Inflation

2012 ◽  
Vol 4 (2) ◽  
pp. 33-64 ◽  
Author(s):  
Charles L Weise
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Federal Reserve ◽  
The United States ◽  
Executive Branch ◽  
The Political ◽  
Political Environment ◽  
Open Market ◽  
Federal Open Market Committee ◽  
The Us

Drawing on an analysis of Federal Open Market Committee (FOMC) documents, this paper argues that political pressures on the Federal Reserve were an important contributor to the rise in inflation in the United States in the 1970s. Members of the FOMC understood that a serious attempt to tackle inflation would generate opposition from Congress and the executive branch. Political considerations contributed to delays in monetary tightening, insufficiently aggressive anti-inflation policies, and the premature abandonment of attempts at disinflation. Empirical analysis verifies that references to the political environment at FOMC meetings are correlated with the stance of monetary policy during this period. (JEL D72, E32, E52, E58, N12)

scholarly journals The influence of central bank monetary policy announcements on cryptocurrency return volatility

2017 ◽  
Vol 14 (4) ◽  
pp. 60-72 ◽  
Author(s):  
Shaen Corbet ◽  
Grace McHugh ◽  
Andrew Meegan
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Interest Rates ◽  
The United States ◽  
Open Market ◽  
Estimation Model ◽  
Federal Open Market Committee ◽  
International Currencies ◽  
Asset Class ◽  
International Monetary Policy

The emergence of Bitcoin in 2009 has received considerable attention surrounding the validity of cryptocurrencies as a viable and, in some jurisdictions, a legal currency alternative. Despite widespread concern that these cryptocurrencies are fostering the environment within which a substantial bubble can occur, it is important to analyze whether these new assets are behaving similarly to major international currencies. This paper investigates the effects of international monetary policy changes on bitcoin returns using a GARCH (1.1) estimation model. The results indicate that monetary policy decisions based on interest rates taken by the Federal Open Market Committee in the United States significantly impact upon bitcoin returns. After controlling for international effects, we find significant evidence of volatility effects driven by United States, European Union, United Kingdom and Japanese quantitative easing announcements. These results show that, despite its nature and ideals, bitcoin seems to be subject to the same economic factors as traditional fiat currencies, and is not entirely unaffected by government policies. This result has implications for investors using bitcoin as a hedging or diversification tool. In addition, we contribute to the existing debate regarding the classification of bitcoin as an asset class, by illustrating that bitcoin volatility exhibits various reactions that bear resemblance to both currency pairs and store-of-value assets.

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