Private Sector Influences on Monetary Policy in the United States

Abstract

I examine the extent to which the Federal Reserve's monetary policy actions are correlated with the expressed wishes of private sector lobbying groups. I update and extend work by Havrilesky (1990, 1993) regarding the effect of signals from the banking industry through the Federal Advisory Council (FAC). I also construct a new database containing statements from non-financial interest groups. I find that monetary policy actions are correlated with signals from non-financial groups before 1979 but not after, and are correlated with signals from the FAC after 1979 but not before. I also find that the Fed's policy stance more closely matches the preferred stance of the banking industry after 1979.