THE ASYMMETRIC EFFECTS OF POLITICAL PRESSURES ON US MONETARY-POLICY

A number of studies have estimated reaction functions focusing solely on economic state variables such as inflation and unemployment. Other reaction function studies have focused on political measures as regres sors. In this study we include both sets of variables to see if politi cal measures are significant when we control for economic state variab les. Reaction functions are estimated for the 1959-91 period and for s ubperiods corresponding to the tenures of different Federal Reserve Bo ard chairmen. We find significant effects for a measure of political i nfluence on the Federal Reserve for the whole period and some subperio ds.