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WP/22/105
IMF Working Paper
Research Department
Voting Right Rotation, Behavior of Committee Members and Financial Market Reactions: Evidence from the U.S. Federal Open Market Committee
Prepared by Michael Ehrmann, Robin Tietz and Bauke Visser*
Authorized for distribution by Maria Soledad Martinez Peria May 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: 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.
| JEL Classification Numbers: | D71, D72, E58 |
| Keywords: | voting right rotation, monetary policy committee, central bank communication, FOMC, financial market response |
| Author’s E-Mail Address: | michael.ehrmann@ecb.int, rtietz@imf.org, bvisser@ese.eur.nl |
| JEL Classification Numbers: | D71, D72, E58 |
| Keywords: | voting right rotation, monetary policy committee, central bank communication, FOMC, financial market response |
| Author’s E-Mail Address: | michael.ehrmann@ecb.int, rtietz@imf.org, bvisser@ese.eur.nl |