Abstract
We investigate how dissent in the FOMC is affected by structural macroeconomic shocks obtained using a medium-scale DSGE model. We find that dissent is less (more) frequent when demand (supply) shocks are the predominant source of inflation fluctuations. In addition, supply shocks are found to raise private sector forecasting uncertainty about the path of interest rates. Since supply shocks impose a trade-off between inflation and output stabilization while demand shocks do not, our findings are consistent with heterogeneous preferences over the dual mandate among FOMC members as a driver of policy disagreement.
This content is only available as a PDF.
© 2023 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
2023
The President and Fellows of Harvard College and the Massachusetts Institute of Technology
You do not currently have access to this content.