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DO POLITICS CAUSE REGIME SHIFTS IN MONETARY POLICY?
Author(s) -
CHEN SHIUSHENG,
WANG CHUNCHIEH
Publication year - 2014
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12007
Subject(s) - economics , monetary policy , politics , monetary economics , interest rate , taylor rule , presidential system , credit channel , monetary hegemony , macroeconomics , inflation targeting , central bank , political science , law
Whether or not politics cause changes in monetary policy is controversial in the literature. This article re‐examines the link between politics and regime shifts in monetary policy using two alternative approaches. First, empirical results show that both the presidential and Federal Reserve Bank (Fed) chairmanship regimes do not influence monetary policy under the assumption that the Fed closely follows an interest rate rule. On the other hand, evidence also suggests that changes in political regimes are able to account for the deviations from the optimal Taylor rule . ( JEL E52, E58, D78)