Political Influence on Monetary Policy: Insights from Historical Tapes

Thomas Drechsel is an assistant professor of economics at the University of Maryland. He joins David on Macro Musings to talk about the political pressure on the Fed and the new ways to measure monetary policy shocks. Thomas and David also discuss fiscal and monetary dominance, the impact of political pressure on inflation, why we should care about central bank independence, and more.

Transcript for this week’s episode.

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Related Links:

*Estimating the Effects of Political Pressure on the Fed: A Narrative Approach with New Data* by Thomas Drechsel

*Identifying Monetary Policy Shocks: A Natural Language Approach* by S. Boragan Aruoba and Thomas Drechsel

*Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence* by Alberto Alesina and Lawrence Summers

*Narrative Sign Restrictions for SVARs* by Juan Antolin-Diaz and Juan Rubio-Ramirez

*Threats to Central Bank Independence: High-Frequency Indentifcation with Twitter* by Francesco Bianchi, Thilo Kind, and Howard Kung

*A New Measure of Monetary Shocks: Derivation and Implications* by Christina Romer and David Romer

Timestamps:

(00:00:00) – Intro

(00:04:47) – Why Should We Care About Central Bank Independence?

(00:08:01) – Fiscal and Monetary Dominance

(00:12:41) – Estimating the Effects of Political Pressure on the Fed

(00:27:14) – Breaking Down the Research Results

(00:36:46) – The Impact of Political Pressure on Inflation

(00:43:07) – Identifying Monetary Policy Shocks: Background, Methodology, and Results

(00:59:45) – Outro