Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-31T15:04:08.112Z Has data issue: false hasContentIssue false
  • English
  • Français

A textual Taylor rule: estimating central bank preferences combining topic and scaling methods

Published online by Cambridge University Press:  18 September 2018

Nicole Baerg Open the ORCID record for Nicole Baerg [Opens in a new window]  and
Will Lowe
Nicole Baerg*
Affiliation:
Department of Government, University of Essex, Colchester CO4 3SQ, UK
Will Lowe
Affiliation:
Department of Politics, Princeton University, Princeton, NJ 08540, USA
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Scholars often use voting data to estimate central bankers’ policy preferences but consensus voting is commonplace. To get around this, we combine topic-based text analysis and scaling methods to generate theoretically motivated comparative measures of central bank preferences on the US Federal Open Market Committee (FOMC) leading up to the financial crisis in a way that does not depend on voting behavior. We apply these measures to a number of applications in the literature. For example, we find that FOMC members that are Federal Reserve Bank Presidents from districts experiencing higher unemployment are also more likely to emphasize unemployment in their speech. We also confirm that committee members on schedule to vote are more likely to express consensus opinion than their off schedule voting counterparts.

Type
Original Articles
Information
Political Science Research and Methods , Volume 8 , Issue 1 , January 2020 , pp. 106 - 122
Copyright
Copyright © The European Political Science Association 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

An earlier version of this project was developed for NLP Unshared Task in PoliInformatics 2014.

References

Acosta, M Meade, EE (2015) Hanging on Every Word: Semantic Analysis of the FOMC’s Postmeeting Statement. Washington, DC: FEDS Notes Board of Governors of the Federal Reserve System.Google Scholar
Adolph, C (2013) Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality. New York: Cambridge University Press.Google Scholar
Ainsley, C (2017) The Politics of Central Bank Appointments. The Journal of Politics 79(4), 1205–1219.Google Scholar
Bennani, H, Farvaque, E Stanek, P (2018) Influence of Regional Cycles and Personal Background on FOMC Members’ Preferences and Disagreement. Economic Modelling 68, 416–424.Google Scholar
Blei, DM, Ng, AY Jordan, MI. (2003) Latent Dirichlet Allocation. Journal of Machine Learning Research 3, 993–1022.Google Scholar
Blinder, AS Reis, R (2005) ‘Understanding the Greenspan Standard’. Proceedings of Economic Policy Symposium - Jackson Hole. Federal reserve Bank of Kansas City, Issue (August), 11–96.Google Scholar
Carroll, R, Lewis, JB, Lo, J, Poole, KT Rosenthal, H (2009) Comparing NOMINATE and IDEAL: Points of Difference and Monte Carlo Tests. Legislative Studies Quarterly 34(4), 555–591.Google Scholar
Chang, J, Boyd-Graber, J, Gerrish, S, Wang, C Blei, DM. (2009) ‘Reading Tea Leaves: How Humans Interpret Topic Models’. Proceedings of the 23rd Annual Conference on Neural Information Processing Systems, pp. 288–296.Google Scholar
Chang, KH (2003) Appointing Central Bankers: The Politics of Monetary Policy in the United States and the European Monetary Union. New York: Cambridge University Press.Google Scholar
Chappell, HW, Havrilesky, TM McGregor, RR (1995) Policymakers, Institutions, and Central Bank Decisions. Journal of Economics and Business 47(2), 113–136.Google Scholar
Chappell, HW, Havrilesky, TM McGregor, RR (2000) Monetary Policy Preferences of Individual FOMC Members: A Content Analysis of the Memoranda of Discussion. The Review of Economics and Statistics 79(3), 454–460.Google Scholar
Chappell, HW Jr, Havrilesky, TM McGregor, RR (1993) Partisan Monetary Policies: Presidential Influence Through the Power of Appointment. The Quarterly Journal of Economics 108(1), 185–218.Google Scholar
Clinton, J, Jackman, S Rivers, D (2004) The Statistical Analysis of Roll Call Data. American Political Science Review 98(2), 1–16.Google Scholar
Crawford, VP Haller, H (1990) Learning How to Cooperate: Optimal Play in Repeated Coordination Games. Econometrica 58(3), 571–595.Google Scholar
Eichler, S Lähner, T (2014) Forecast Dispersion, Dissenting Votes, and Monetary Policy Preferences of FOMC Members: The Role of Individual Career Characteristics and Political Aspects. Public Choice 160(3–4), 429–453.Google Scholar
Eijffinger, S, Mahieu, R Raes, L (2018) Inferring Hawks and Doves from Voting Records. European Journal of Political Economy 51(C), 107–120.Google Scholar
El-Shagi, M Jung, A (2015) Does the Greenspan Era Provide Evidence on Leadership in the FOMC? Journal of Macroeconomics 43, 173–190.Google Scholar
Gerlach-Kristen, P Meade, EE (2010) ‘Is There a Limit on FOMC Dissents? Evidence from the Greenspan Era’. Working Paper 2010-16, American University, Department of Economics.Google Scholar
Goodman, LA (1985) The Analysis of Cross-Classified Data Having Ordered and/or Unordered Categories: Association Models, Correlation Models, and Asymmetry Models for Contingency Tables With or Without Missing Entries. The Annals of Statistics 13(1), 10–69.Google Scholar
Gordon, DB Leeper, EM (1994) The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification. Journal of Political Economy 102(6), 1228–1247.Google Scholar
Hallerberg, M Wehner, J (2018) When Do You Get Economists as Policy Makers? British Journal of Political Science, 1–13.Google Scholar
Havrilesky, T Gildea, J (1991) The Policy Preferences of FOMC Members as Revealed by Dissenting Votes: Comment. Journal of Money, Credit, and Banking 23(1), 130–138.Google Scholar
Havrilesky, T Gildea, J (1995) The Biases of Federal Reserve Bank Presidents. Economic Inquiry 33(2), 274–284.Google Scholar
Hayo, B Méon, P-G (2013) Behind Closed Doors: Revealing the ECB’s Decision Rule. Journal of International Money and Finance 37, 135–160.Google Scholar
Hix, S, Høyland, B Vivyan, N (2010) From Doves to Hawks: A Spatial Analysis of Voting in the Monetary Policy Committee of the Bank of England. European Journal of Political Research 49(6), 731–758.Google Scholar
Johnson, J (2016) Priests of Prosperity: How Central Bankers Transformed the Postcommunist World. Ithaca: Cornell University Press.Google Scholar
Kaplan, SB (2017) Partisan Technocratic Cycles in Latin America. Electoral Studies 45, 219–229.Google Scholar
Lauderdale, BE Clark, TS (2014) Scaling Politically Meaningful Dimensions Using Texts and Votes. American Journal of Political Science 58(3), 754–771.Google Scholar
Lowe, W, Benoit, K, Laver, M Mikhaylov, S (2011) Scaling Policy Positions from Coded Units of Political Texts. Legislative Studies Quarterly 36(1), 123–155.Google Scholar
Lucas, C, Nielsen, RA, Roberts, ME, Stewart, BM, Storer, A Tingley, D (2015) Computer-assisted text analysis for comparative politics. Political Analysis 23(2), 254–277.Google Scholar
Meade, EE (2005) The FOMC: Preferences, Voting, and Consensus. Federal Reserve Bank of St. Louis Review 87(2), 93–101.Google Scholar
Meade, EE Sheets, DN (2005) Regional Influences on FOMC Voting Patterns. Journal of Money, Credit, and Banking 37(4), 661–677.Google Scholar
Meade, EE Nathan Sheets, D (2005) Regional Influences on FOMC Voting Patterns. Journal of Money, Credit and Banking 37, 661–677.Google Scholar
Meade, EE Stasavage, D (2008) Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve. The Economic Journal 118(528), 695–717.Google Scholar
Plosser, CI (2014) Monetary Rules: Theory and Practice. Journal of Economic Dynamics and Control 49, 144–146.Google Scholar
Poole, KT Rosenthal, H (1997) Congress: A Political-Economic History of Roll Call Voting. New York: Oxford University Press.Google Scholar
Proksch, S-O Slapin, JB (2012) Institutional Foundations of Legislative Speech. American Journal of Political Science 56, 520–537.Google Scholar
Riboni, A Ruge-Murcia, FJ (2010) Monetary Policy by Committee: Consensus, Chairman Dominance, or Simple Majority? The Quarterly Journal of Economics 125(1), 363–416.Google Scholar
Roberts, ME, Stewart, BM, Tingley, D, Lucas, C, Leder-Luis, J, Gadarian, SK, Albertson, B Rand, DG (2014) Structural Topic Models for Open-Ended Survey Responses. American Journal of Political Science 58(4), 1064–1082.Google Scholar
Rosa, C Verga, G (2007) On the Consistency and Effectiveness of Central Bank Communication: Evidence from the ECB. European Journal of Political Economy 23, 146–175.Google Scholar
Schelling, T (1978) Micromotives and Macrobehavior. Toronto: George J. McLeod Ltd.Google Scholar
Schonhardt-Bailey, C (2013) Deliberating American Monetary Policy: A Textual Analysis. Boston: MIT Press.Google Scholar
Schwarz, D, Traber, D Benoit, K (2017) Estimating Intra-Party Preferences: Comparing Speeches to Votes. Political Science Research and Methods 5(2), 379–396.Google Scholar
Shapiro, C Varian, HR (2013) Information Rules: A Strategic Guide to the Network Economy. Boston: Harvard Business Press.Google Scholar
Slapin, JB Proksch, S-O (2008) A Scaling Model for Estimating Time-Series Party Positions from Texts. American Journal of Political Science 52(3), 705–722.Google Scholar
Taylor, J (1993) ‘Discretion vs Policy Rules in Practice’. Carnegie Rochester Conference Series on Public Policy, North Holland, pp. 195–214.Google Scholar
Thornton, DL Wheelock, DC (2014) Making Sense of the Dissents: A History of FOMC Dissents. Federal Reserve Bank of St. Louis Review 96(3), 213–227.Google Scholar
Tootell, GMB (1996) Appointment Procedures and FOMC Voting Behavior. Southern Economic Journal 63, 191–204.Google Scholar
Wang, X, McCallum, A Wei, X (2007) ‘Topical n-Grams: Phrase and Topic Discovery, with an Application to Information Retrieval’. Proceedings of the 7th IEEE International Conference on Data Mining, Chapel Hill, 28-31 October.Google Scholar
Warsh, K (2014) Transparency and the Bank of England’s Monetary Policy Committee. A review. Available at www.bankofengland.co.uk/publications/Documents/news/2014/warsh.pdf, accessed 3 January 2016.Google Scholar
Woodford, M (2005) ‘Central Bank Communication and Policy Effectiveness’. NBER Working Paper No. 11898, National Bureau of Economic Research, Federal Reserve Bank of Kansas City, 399–474.Google Scholar
Supplementary material: PDF

Baerg and Lowe supplementary material

Appendix

Download Baerg and Lowe supplementary material(PDF)
PDF 346 KB
Supplementary material: Link

Baerg and Lowe Dataset

Dataset

https://doi.org/10.7910/DVN/SGB8FE
Link