American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been difficult to quantify. This book provides a systematic examination of deliberation on monetary policy from 1976 to 2008 by the Federal Reserve’s Open Market Committee (FOMC) and House and Senate banking committees. The innovative account employs automated textual analysis software to study the verbatim transcripts of FOMC meetings and congressional hearings; these empirical data are supplemented an ... More

American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been difficult to quantify. This book provides a systematic examination of deliberation on monetary policy from 1976 to 2008 by the Federal Reserve’s Open Market Committee (FOMC) and House and Senate banking committees. The innovative account employs automated textual analysis software to study the verbatim transcripts of FOMC meetings and congressional hearings; these empirical data are supplemented and supported by in-depth interviews with participants in these deliberations. The automated textual analysis measures the characteristic words, phrases, and arguments of committee members; the interviews offer a way to gauge the extent to which the empirical findings accord with the participants’ personal experiences. Decade after decade, Fed chairman after Fed chairman, one feature is evident in the discourse between central bankers and US legislators: Fed chairmen tend to talk about the technicalities of monetary policy while senators and representatives talk about other things, such as jobs, fiscal policy, energy policy, education, and so on. All too often they simply talk past one another. Analyzing why and under what conditions deliberation matters for monetary policy in the FOMC, the book identifies several strategies of persuasion used by committee members, including Paul Volcker’s emphasis on policy credibility and efforts to influence economic expectations.