Deliberating American Monetary Policy

Deliberating American Monetary Policy: A Textual Analysis

Cheryl Schonhardt-Bailey
with assistance and advice from Andrew Bailey
Copyright Date: 2013
Published by: MIT Press
Pages: 536
https://www.jstor.org/stable/j.ctt9qf5r7
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  • Book Info
    Deliberating American Monetary Policy
    Book Description:

    American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been difficult to quantify. In this book, Cheryl Schonhardt-Bailey provides a systematic examination of deliberation on monetary policy from 1976 to 2008 by the Federal Reserve's Open Market Committee (FOMC) and House and Senate banking committees. Her innovative account employs automated textual analysis software to study the verbatim transcripts of FOMC meetings and congressional hearings; these empirical data are supplemented and supported by in-depth interviews with participants in these deliberations. The automated textual analysis measures the characteristic words, phrases, and arguments of committee members; the interviews offer a way to gauge the extent to which the empirical findings accord with the participants' personal experiences. Analyzing why and under what conditions deliberation matters for monetary policy, the author identifies several strategies of persuasion used by FOMC members, including Paul Volcker's emphasis on policy credibility and efforts to influence economic expectations. Members of Congress, however, constrained by political considerations, show a relative passivity on the details of monetary policy.

    eISBN: 978-0-262-31472-5
    Subjects: Business, Economics

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-x)
  4. 1 Introduction: Why Deliberation?
    (pp. 1-36)

    Over the ten to fifteen years preceding the 2007 to 2009 financial crisis, US monetary policy was generally regarded as a success and Alan Greenspanʹs Federal Reserve (or ʺFedʺ) as the exemplar of astute decision-making in monetary policy. In the immediate aftermath of the crisis, reassessments of this policy success abounded. In years to come, we may expect to see yet further reappraisals of US monetary policy under Greenspanʹs Fed, as well as differing assessments on whether Ben Bernankeʹs Fed has dealt effectively with the turmoil of the crisis and its subsequent recession in the United States. What is clear...

  5. 2 Deliberation in Theoretical Perspective
    (pp. 37-56)

    We note in the introduction that our analysis of monetary policy focuses on the process of decision-making—not the end product in terms of the policy outcome, but rather the means by which policy makers and politicians converse about monetary policy. Hence our primary concern lies with the deliberations among policy makers and politicians within a number of committee settings. We investigate empirically the discourse and deliberation among these actors as it pertains to one single theme—US monetary policy. Importantly, however, our study is unique in that it encompasses two different institutional committee settings, each with its own purpose...

  6. 3 Deliberation in the FOMC
    (pp. 57-196)

    In this chapter we use the transcript records of the FOMC to assess the contribution of deliberation by individual members within the committee setting as a means to cast light on the fundamental transformation of monetary policy in the United States over the last 30 years. This period has seen the emergence of a strong consensus worldwide around establishing and maintaining persistent low inflation as the appropriate goal of monetary policy. The experience of the United States is quite typical in this respect, with the shift to a consistent pursuit of low inflation starting with the so-called Volcker Revolution in...

  7. 4 Congressional Committees and Monetary Policy
    (pp. 197-360)

    I donʹt suppose that anyone would still argue that the central banking system should be independent of the Government of the country. The control which such a system exercises, over the volume and value of money is a right of Government and is exercised on behalf of Government, with powers delegated by the Government. But there is a distinction between independence from Government and independence from political influence in a narrower sense. The powers of the central banking system should not be a pawn of any group or faction or party, or even any particular administration, subject to political pressures...

  8. 5 In Their Own Words—Perspectives from the FOMC and Congressional Banking Committees
    (pp. 361-454)

    This chapter extends the approach used in the previous two chapters to present politicians, FOMC members and Fed and congressional staff with the results of our textual analysis. Hence our purpose here is to ʺtriangulateʺ along the lines suggested by Gaskell and Bauer (2000), by incorporating an independent method—namely elite interviews—to corroborate the results from our use of textual analysis to study deliberation. In the conclusion to this chapter we set out the main findings from the interviews in respect of the hypotheses from chapter 2. Since the interview approach is intended to encompass the whole scope of...

  9. 6 Does Deliberation Matter for Monetary Policy-Making?
    (pp. 455-468)

    We began this study with the somewhat optimistic premise thatdeliberation(i.e., reason-giving argument with the intended purpose of persuading) does indeed matter for monetary policy-making in the United States. But, we also noted that, having looked at what central bankers actually said in policy-making meetings and what politicians discussed when holding the Federal Reserve chairman accountable, we might ultimately find that it does not matter much, or perhaps matters only under certain circumstances. We anticipated finding both in the FOMC and in congressional oversight hearings some evidence of reason-giving and that some members are subsequently persuaded by the arguments...

  10. Notes
    (pp. 469-480)
  11. Bibliography
    (pp. 481-492)
  12. Index
    (pp. 493-526)