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Voting Right Rotation, Behavior of Committee Members and Financial Market Reactions: Evidence from the U.S. Federal Open Market Committee
Author:
Michael Ehrmannnull

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,
Robin Tietz
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Bauke Visser
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 105
Language:
English
Publication Date:
27 May 2022
DOI:
https://doi.org/10.5089/9798400210075.001
ISBN:
9798400210075
ISSN:
1018-5941
Pages:
44
Keywords:
voting right rotation; monetary policy committee; central bank communication; FOMC; financial market response; motivation hypothesis; communication behavior; presidents vote; FOMC meeting; Fed president; voting status; Unemployment; Unemployment rate; Inflation; Financial sector; Asset prices
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Which Federal Reserve Bank presidents vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: nonvoting presidents do attend and participate in the meetings of the committee. We test two hypotheses about the dependence of presidents' behavior on voting status. (i) Loss compensation: presidents compensate the loss of the right to vote with an increased use of speeches and contributions. (ii) Motivation: presidents complement the right to vote with an increased use of speeches and contributions. The evidence favors the motivation hypothesis. Also, in years that presidents vote, their speeches move financial markets less than in years they do not vote. We argue that this vote discount is consistent with presidents’ communication behavior.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 105