This paper examines whether the interest rate preferences of Federal Reserve Bank Presidents are subject to a regional bias. In order to evaluate the regional bias hypothesis, we augment individual Taylor rules for the Federal Reserve Bank Presidents (sample 1989 to 2006) with regional variables and test for their influence on the Presidents’ interest rate preferences. These preferences stem from FOMC (Federal Open Market Committee) transcripts. Estimates based on the augmented Taylor rules reveal that the preferences of some Federal Reserve Bank Presidents were not free of a regional bias. Augmented Taylor rules with inertia, however, show that this finding could also be due to the presence of an interest rate smoothing motive.
augmented Taylor rule interest rate preferences real-time data regional bias SUR model