XXV Edition

1-2 December 2016"

Regional Banking Instability and Fomc Voting

Eichler Stefan, TU Dresden
Lähner Tom, Leibniz University of Hanover
Noth Felix, Halle Institute for Economic Research

This study analyzes if regionally affiliated Federal Open Market Committee (FOMC) members take their districts’ regional banking sector instability into account when they vote. Considering the period 1978–2010, we find that a deterioration in a district’s bank health increases the probability that this district’s representative in the FOMC votes to ease interest rates. According to member-specific characteristics, the effect of regional banking sector instability on FOMC voting behavior is most pronounced for Bank presidents (as opposed to Governors) and FOMC members who have career backgrounds in the financial industry or who represent a district with a large banking sector.

Area: Monetary Policy and Central Banking

Keywords: FOMC voting; Regional banking sector instability; Lobbying

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