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

By Michael Ehrmann, Robin Tietz, Bauke Visser

May 27, 2022

Preview Citation

Format: Chicago

Michael Ehrmann, Robin Tietz, and Bauke Visser. Voting Right Rotation, Behavior of Committee Members and Financial Market Reactions: Evidence from the U.S. Federal Open Market Committee, (USA: International Monetary Fund, 2022) accessed December 3, 2024

Disclaimer: 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.

Summary

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.

Subject: Asset prices, Economic sectors, Financial sector, Inflation, Labor, Prices, Unemployment, Unemployment rate

Keywords: Asset prices, Central bank communication, Communication behavior, Fed president, Financial market response, Financial sector, FOMC, FOMC meeting, Inflation, Monetary policy committee, Motivation hypothesis, Presidents vote, Unemployment, Unemployment rate, Voting right rotation, Voting status

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/105
Stock No:

WPIEA2022105
ISBN:

9798400210075
ISSN:

1018-5941

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