Banking and other Private Sector Influences on Monetary Policy

Abstract

Previous chapters have developed evidence of systematic Administration and Congressional influence on Federal Reserve monetary policy. Next we turn to the matter of private interest group pressures on monetary policy. Three significant questions need to be answered. First, do private interest groups attempt to influence Federal Reserve policymaking systematically over time? The impact of fiscal and other shocks on interest rates, exchange rates, and output may be so variable over time (for example, because of changes in the tax and financial regulatory structures) and the political clout of certain interest groups may so fluctuate over time (for example, because of demographic changes) as to militate against meaningful persistent pressures from specific private groups over time. Second, if systematic attempts are made to influence monetary policy, what are the channels of communication? Do private interest groups try to affect monetary policy directly through formal institutions within the Federal Reserve System, such as the Bank directorates where they are represented (Havrilesky 1986), the Federal Advisory Council or the Consumer Advisory Council, does their influence work indirectly through lobbying pressure on the executive and legislative branches which, in turn, may periodically transmit related signals to the Federal Reserve, or does their influence work simply because Federal Reserve officials pay attention to the opinions of spokespersons and analysts employed by private interest groups? Third, whatever the interest groups and their communications channels, can the signals be measured? If policy directives within formal institutions are not made public, and if analysts, spokespersons, and lobbyists do not regularly receive public media exposure, evidence of signaling, not to mention responsiveness to it, will be difficult to uncover.