DP16213 Voting right rotation, behavior of committee members and financial market reactions: Evidence from the U.S. Federal Open Market Committee

Author(s): Michael Ehrmann, Robin Tietz, Bauke Visser
Publication Date: June 2021
Keyword(s): central bank communication, financial market response, FOMC, Monetary policy committee, voting right rotation
JEL(s): D71, D72, E58
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16213

Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior.