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 regressors. In this study we include both sets of variables to see if political measures are significant when we control for economic state variables. Reaction functions are estimated for the 1959-91 period and for subperiods corresponding to the tenures of different Federal Reserve Board chairmen. We find significant effects for a measure of political influence on the Federal Reserve for the whole period and some subperiods.