Discussion paper

DP17999 Identification of Systematic Monetary Policy

We propose a novel identification design to estimate the effects of systematic monetary policy on the propagation of macroeconomic shocks. The design combines (i) a time-varying measure of systematic monetary policy based on the historical composition of hawks and doves in the FOMC with (ii) an instrument that leverages the FOMC rotation of voting rights. We apply our design to government spending shocks. We find that a dovish FOMC supports the expansionary effects of higher spending by delaying policy rate hikes, leading to large fiscal multipliers. GDP does not expand when the FOMC is hawkish, but inflation expectations are contained.


Hack, L, K Istrefi and M Meier (2023), ‘DP17999 Identification of Systematic Monetary Policy‘, CEPR Discussion Paper No. 17999. CEPR Press, Paris & London. https://cepr.org/publications/dp17999