Reserve banks, the discount rate recommendation, and FOMC policy

In the United States, private citizens play little direct role in policymak ing. The directors of the boards of the regional Federal Reserve banks are an apparent exception to this rule. These directors recommend changes in th e discount rate, although the Board of Governors decides whether to act on the recommendations. These directors would have greater influence if they a ffected the FOMC votes of their district bank presidents. This paper shows that the FOMC votes of the regional bank presidents are strongly correlated with the discount rate recommendation of their bank's board. Several alter native explanations for the correlation are then examined.