Kuper & Veurink: Central Bank Independence and Political Pressure in the Greenspan Era


This paper investigates whether political pressure from incumbent presidents influences the Fed’s monetary policy during the period that Alan Greenspan was the chairman of the United States Federal Reserve Board. A modified Taylor rule with time-varying coefficients will be used to test well-known political-economic theories of Nordhaus (1975) and Hibbs (1987). The findings suggest that the Fed under Greenspan did not create election driven monetary cycles, but was less inflation averse with a Democratic president.


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