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Article
A Political Model of Monetary Policy with Application to the Real Fed Funds Rate
Journal of Law and Economics
  • Tony Caporale, University of Dayton
  • Kevin B. Grier, Centro de Investigación y Docencia Económicas
Document Type
Article
Publication Date
10-1-1998
Abstract
We construct an empirical model of U.S. monetary policy assuming that the Federal Reserve is an ordinary federal bureaucracy. We use the real Federal Funds rate as our policy measure and show the existence of significant executive, legislative, and bureaucratic influence on the real rate of interest from 1961 to 1996. We find that presidential party is an adequate statistical measure of executive influence and that the voting scores of the Senate Banking Committee leadership best represent legislative influence. We argue that political changes cause systematic and predictable changes in monetary policy.
Inclusive pages
409-428
ISBN/ISSN
0022-2186
Comments

Permission documentation is on file.

Publisher
The University of Chicago Press
Place of Publication
Chicago, IL
Peer Reviewed
Yes
Citation Information
Tony Caporale and Kevin B. Grier. "A Political Model of Monetary Policy with Application to the Real Fed Funds Rate" Journal of Law and Economics Vol. 41 Iss. 2 (1998)
Available at: http://works.bepress.com/tony_caporale/3/