Date of Award

1-1-2011

Document Type

Campus Access Thesis

Department

Moore School of Business

Sub-Department

Economics

First Advisor

Henry W Chappell

Abstract

It has been suggested that dissenting in Federal Open Market Committee (FOMC) meetings may be limited. This question was explored in a paper written by Petra Gerlach-Kristen and Ellen Meade where the authors examined voting behavior under Chairman Greenspan's term of service. The authors find evidence that dissents influence future changes in the federal funds rate and that the voting record therefore conveys important information to financial markets. Laurence Meyer, while describing his term on the FOMC, postulated that there was a known limit to the number of dissents that could be cast during a policy vote. Gerlach-Kristen and Meade note that because the voting procedure is alphabetical, an implicit constraint on expressing dissent could limit opportunities of members with surnames beginning with letters late in the alphabet from expressing their dissent and therefore prevent potentially valuable information from reaching financial markets. In their analysis, Gerlach-Kristen and Meade use a multinomial probit to test Meyer's hypothesis, and their evidence supports this conjecture. Because the dependent variable here is naturally ordered, where a policymaker's preference is for tighter, unchanged, or looser interest rates, it is appropriate to specify an ordered rather than multinomial probit. To investigate Meyer's claim, while accounting for the naturally ordered nature of the voter's policy choice, a model is specified using a generalized version of the ordered probit. Using this technique, I find no support for Meyer's hypothesis or that voting position influenced policymakers' decisions to dissent.

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