The Politics of Monetary Policy: A Critical Review

Abstract

The Federal Reserve Bank of the United States is a pre-eminent banking institution, and an institution that has been subject to scrutiny from a wide variety of scholarly perspectives. The object of this article is to review prominent works dealing with the politics of the Federal Reserve, particularly its relations with other institutions and their effects on monetary policy. The review shows that the formal legal independence of a central bank such as the Fed does not mark the end of monetary politics, and its record suggests a greater measure of modesty and caution on the part of enthusiasts for independent central banks.

Monetary policy and anxious presidents: The effects of monetary shocks on presidential job approval

“…This study's results also contribute to the literature focusing on the challenges that a democratic system faces when dealing with strong policy‐making institutions that are weakly accountable (Jacobs & King, 2016; Woolley, 1994). While generally perceived as an institution that primarily deals with a technical economic issue, the Fed's influences on its socioeconomic and political surroundings are multidimensional.…”

The Correlates of Change in International Financial Regulation

“…The effect of liberalization on monetary and exchange rate policies has been well studied, and I will not address it here. (See, e.g., Cukierman 1992, Frieden 1991, and Goodman and Pauley 1993. Woolley 1994 reviews some of the literature.…”

An Attributional Model of Economic Voting: Evidence from the 2000 Presidential Election

“…A third government institution-the Federal Reserve-may also be held responsible, for while Congress and the President control the instruments of fiscal policy, the tools of monetary policy lie beyond their direct control. Scholars disagree over the extent to which the Federal Reserve is influenced by presidential and congressional preferences (Beck 1982;Grier 1991;Havrilesky 1988;Hibbs 1987;Wolley 1994). Morris (2000) has recently argued that Fed policy depends upon the constellation of preferences in both institutions.…”