Is There a Dead Spot? New Evidence on FOMC Decisions Before Elections


  • This paper is taken from a chapter of my 2003 U.C. Berkeley Ph.D. dissertation. The views expressed in this paper are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or of the Federal Reserve System. I thank George Akerlof, Allan Drazen, Dan McFadden, Allan Meltzer, Maury Obstfeld, Janet Yellen, two anonymous referees, and especially, Geoff Tootell for helpful discussions and comments. I thank David H. Small, Geoff Tootell, and Athanasios Orphanides for graciously sharing their data. Any remaining errors are my own.


Using new data that chronicle the Fed's internal forecast of the output gap from 1973 to 1998, this paper tests for an electoral cycle in the decisions of the Federal Open Market Committee (FOMC). The paper provides evidence of a dead spot in the committee's decisions before presidential elections. For given values of these internal forecasts, the FOMC is less likely to decide to tighten monetary policy in the year preceding a presidential election than at other times.