بررسی چالش های قانونی برای استقلال بانک مرکزی: مدل هزینه های اقتصاد کلان و سازمان

This study examines the determinants of legislative threats (from the US Congress) to the Federal Reserve’s prerogatives (e.g., budgetary authority, autonomy, secrecy, etc.). Specifically, two competing theories of legislative threats – one relating the Fed’s management of the macro economy and the other to the Fed’s expense preference behavior (i.e., its budget-building activity) – are empirically modeled. The results suggest that aspects of both the “macroeconomic model” and the “agency costs/political model” have merit. However, tests of non-nested hypotheses indicate the superiority/dominance of the latter model in explaining variations in legislative threats from Congress over time (1964–1993).

The concept of central bank autonomy has been a matter of debate since the legislative proposals leading up to the Federal Reserve Act of 1913. The main channels of academic research in this area (see Waller, 1992) have included direct signaling of monetary policy desires from the administration and Congress to the Federal Reserve ( Havrilesky, 1987, Havrilesky, 1988 and Havrilesky, 1995, coercion by the administration ( Waller, 1991), and central bank appointments ( Chappell, Havrilesky, & McGregor, 1993; Havrilesky, 1995; Havrilesky and Gildea, 1991 and Havrilesky and Gildea, 1992; Mixon & Gibson, 2002; Waller, 1992 and Waller, 2000). Much of the recent literature indicates that, despite the Fed’s independence, pressures from public and private sources have considerable influence on monetary policy ( Froyen, Havrilesky, & Waud, 1997; Havrilesky, 1988, Havrilesky, 1990 and Havrilesky, 1995). The consensus is that there is some scope for administrations to succeed in attempts to influence Fed decision-making. As Havrilesky summarizes, “in order to protect its prerogatives the Federal Reserve [as an agent] … must respond to pressures [from its principals]. Since one of these prerogatives is … autonomy, it follows that the central bank periodically might tactically surrender some autonomy in the near term … to protect it … in the longer term” ( Havrilesky, 1995, p. 187). An additional area of related research has examined the implications concerning inflation that emerge from central bank (in)dependence. The early consensus (using cross-country data) was that central bank independence promotes lower levels of inflation (see Alesina & Summers, 1993 and Cukierman, 1992); more recent work offers less conclusive evidence of this relationship (Barro, 1999). Still, other research has focused on the expense preference implications of the principal-agent relationship between the Federal Reserve and the US Congress. As Boyes, Mounts, and Sowell (1998) argue, it has long been recognized that agents tend to increase their own utility at the expense of principals. This is “especially true in the presence of asymmetric information and the associated costly monitoring,” and the expense preference behavior of bureaus (e.g., the Fed) “ … may be seen in shirking, taking perquisites, and other budget-building actions unrelated to the task of the bureau … ” (Boyes et al., 1998, p. 552). The present paper builds on two areas of recent research concerning influence/control of the Federal Reserve (the agent) by its primary principal (the US Congress). Specifically, our study examines two sets of correlates of legislative threats (from the US Congress) to the Federal Reserve’s prerogatives (e.g., budgetary authority, autonomy, etc.). Each of these sets of correlates relates to a distinct theoretical construct of Congressional motivations for influencing Fed behavior through legislative threats to its independence. These are (1) macroeconomic factors that relate to the re-election desires of incumbent politicians, and (2) agency costs factors that relate to congressional (i.e., the principal) oversight over central bank (i.e., the agent) activities related to “budget-building” (i.e., expense preference behavior). Our study is unique in that these distinct sets of regressors are tested as competing theories in explaining variations in the legislative threat count (using data from Havrilesky, 1995) from 1964 through 1993. 2. Motivations for congressional control of the fed: testing alternative theories There is an extensive literature concerning legislative and executive branch attempts to influence monetary policy in the United States (see Friedman, 1982 and Havrilesky, 1995). Much of it centers around the use of signaling through the financial media, by an Administration, of its monetary policy desires in order to influence the direction and magnitude of the central bank’s management of the macro economy (see Havrilesky, 1987, Havrilesky, 1988, Havrilesky, 1990 and Havrilesky, 1995; Havrilesky, Sapp, & Schweitzer, 1975). One hypothesis that explains the observed pattern of success by Administrations in this regard is that the Federal Reserve is seeking Administration support in order to resist Congressional threats to its prerogatives.1 Over the past four decades, Administration success in signaling has been coupled with “fairly high levels of Congressional concern regarding the central bank’s budgetary authority, regulatory powers and monetary policy autonomy and secrecy (Havrilesky, 1995, p. 158).”2 Put differently, Federal Reserve Chairmen, as guardians of the system, often sacrifice their own independence – by succumbing to Administration signaling despite threats from Congress – in order to preserve the overarching independence of the institution that they head (Havrilesky, 1995, p. 187). There is a paucity of research in economics concerning the specific motivation of Congress’ efforts to secure legislation that would threaten the Fed’s independence. Havrilesky’s work indicates that “the threatening posture of Congress to Federal Reserve privileges … depend[s] on the state of the economy” (Havrilesky, 1995, p. 221).3 This macroeconomic model, however, does not allow for the possibility of other (perhaps complementary or competing) theories, such as agency costs or public choice motivations for Congressional threats to the Fed’s prerogatives. These and other issues are addressed in the models presented in the present research. This work extends two areas of recent research concerning influence/control of the Federal Reserve (the agent) by its primary principal (the US Congress). Specifically, we examine two sets of correlates of legislative threats to the Federal Reserve’s prerogatives. The first set contains macroeconomic regressors that relate, in part, to how well the Fed is managing the macro economy, a role assumed by the Fed in the years after its creation by Congress (and modeled in Havrilesky’s earlier work). Given the ubiquitous concerns over re-election in the federal legislature, individual competition (i.e., incumbents vs. challengers) and competition among political parties will influence both fiscal policy and the use of various monetary instruments by the central bank (see Alesina, Roubini, & Cohen, 1997). As such, macroeconomic motivations will exist for federal legislators to influence Fed policy, perhaps through legislative proposals that threaten the Fed’s prerogatives. The second set of regressors builds a model that supplements the work of Boyes, Mounts, and Sowell (1988, 1998) regarding the principal-agent aspects of the Federal Reserve’s relationship with Congress. As they point out, and consistent with the work of Niskanen (1971), if the Federal Reserve System is a bureaucracy, it will engage in efforts to expand. The Treasury, and implicitly Congress, however, currently act as residual claimants to Federal Reserve open market revenues and are aware of the trade-off between Federal Reserve expenses and their own residual claims (Boyes et al., 1998, p. 552). Any expense-preference activities at the Fed (i.e., budget-building actions unrelated to the tasks of the agency/bureau, etc.) would be costly to Congress’ efforts to provide greater spending on government programs that benefit constituents (i.e., voters and interest groups). As such, one would expect that Congressional threats to the Federal Reserve’s independence would be a function of, perhaps, the System’s annual budget/expenses (as well as other political variables). Based in part on the discussion above, the following macroeconomic and agency costs/public choice models are presented below (all variables are defined in Table 1): equation(1) View the MathML source equation(2) View the MathML source Table 1. Summary statistics Variable name Definition Mean S.D. THREATt Number of bills in the US Congress in year t that threaten the Federal Reserve’s prerogatives (e.g., autonomy, etc.) 5.567 3.702 Ut The US unemployment rate in year t 6.187 1.618 (Ut − Ut−1) The US unemployment rate in year t minus the US unemployment rate in year t − 1 0.037 1.020 Pt The US inflation rate in year t 5.350 3.033 (Pt − Pt−1) The US inflation rate in year t minus the US inflation rate in year t − 1 0.057 2.052 ECONt The total number of “economists” appointed to the Fed Board by each incumbent President through year t 2.567 1.924 HOPPt The proportion of the US House of Representatives in year t represented by the political party opposing the incumbent President 0.518 0.113 SOPPt The proportion of the US Senate in year t represented by the political party opposing the incumbent President 0.478 0.090 FIRST Dummy variable equal to 1 for the first year of each Congressional session (odd years), and 0 otherwise 0.500 0.509 DPREZt Dummy variable equal to 1 for Democratic control of the White House in year t, and 0 otherwise 0.333 0.479 RTEXPt The real value of Federal Reserve expenses (millions) in year t [sum of Board of Governors and Federal Reserve Banks expenditures] $956.8 $200.9 Sources: 1. Board of Governors of the Federal Reserve System, 82nd Annual Report (1995), Washington, DC. 2. Economic Report of the President, Department of Commerce, Bureau of Economic Analysis, Washington, DC, various issues/years. 3. Havrilesky, T. (1995). The pressures on American monetary policy. Boston, MA: Kluwer Academic Publishers. 4. Statistical Abstract of the United States, US Department of Commerce, Bureau of the Census, various issues/years. Table options In both equations THREATt is the dependent variable and measures the number of federal bills introduced each year (from 1964 to 1993) that threaten the budgetary authority, regulatory domain, or monetary policy autonomy and secrecy of the Federal Reserve System. These data are taken from Havrilesky (1995), and were retrieved from two primary sources: the Congressional Information Service’s Congressional Digest of Bills and Resolutions and Congressional Quarterly’s Washington Alert ( Havrilesky, 1995, p. 178). The data are based on legislative summaries that mention phrases such as “Federal Reserve,” “Federal Reserve Board,” “Federal Reserve Act,” and “Federal Open Market Committee,” and they cover all sessions of Congress during the 1964–1993 period. 4 These data are also discrete (count) in nature, a feature that will be discussed in more detail below. The macroeconomic model of the determinants of legislative threats is specified above as Eq. (1). Included as regressors are Ut and Pt, the annual rates of unemployment and inflation, respectively, for the period under consideration (1964–1993). It is expected that both of these measures will be positively related to THREATt, given research relating macroeconomic conditions to both Congressional use of fiscal policy and Congressional influence on the use of monetary policy by the Fed (see Alesina et al., 1997). These hypotheses are also consistent with Havrilesky’s (1995) use of the misery index in his more parsimonious model, and with other literature relating to the impact of economic variables on both presidential and congressional election outcomes ( Fair, 1978, Fair, 1982 and Fair, 1996; Mixon & Upadhyaya, 2002a). Next, both (Ut − Ut−1) and (Pt − Pt−1) are included to examine the relationship between changes in the unemployment and inflation rates and the number of legislative threats to the Fed’s prerogatives that emanate annually from the US Congress. Again, both of these variables are expected to be positively related to THREATt in Eq. (1). Finally, ECONt is included in Eq. (1), and measures the total number of “economists” appointed to the Federal Reserve’s Board of Governors by each incumbent President up through year t in the sample (1964–1993). 5 Administrations that continually appoint “economists” to the Federal Reserve’s Board of Governors as a source of “expected political support,” resulting from successful management of the macro economy, are likely to be viewed by voters and other Congressional constituencies as attentive to macroeconomic concerns. 6 Therefore, it is likely that ECONt will be negatively related to THREATt in Eq. (1). Next, Eq. (2) addresses the agency costs/public choice determinants of THREATt. In both the Havrilesky and Gildea (1992) and Waller (1992) models of Presidential appointments to the Fed’s Board, opposition control of the US Senate, as the confirming body in the federal legislature, plays an important role in determining whether a President gets acceptance of his Board candidates. In both models, the likelihood of acceptance is lower under Senate opposition, ceteris paribus. In this study, opposition to a President’s conduct of monetary policy may emanate from both branches of Congress, given that such opposition comes in the way of legislative threats (i.e., bills) that would make the Fed less independent (more political). As such, the proportion of the US House (Senate) represented by the political party in opposition to the incumbent President should be positively related to the number of legislative threats each year. We, therefore, expect that both HOPPt and SOPPt will be positively related to THREATt. Following Havrilesky (1995), a binary variable (FIRST) assigned a value of one in each odd year and zero in each even year is included. This binary captures the increase in legislation, including bills directed at the Federal Reserve, that typically accompanies the opening year of each Congress (Havrilesky, 1995, pp. 220–221). It, therefore, is expected to be positively related to THREATt. DPREZt, a binary variable equal to 1 for years with a Democrat President (and zero otherwise) is included simply to control for variations in THREATt that relate to different political parties that may control the White House. As such, no a priori relationship is expressed between this measure and THREATt. Finally, an agency costs variable (RTEXPt) is included that measures the real value of Federal Reserve System expenses (i.e., the sum of Board of Governors’ and Federal Reserve Banks’ expenses, in millions) each year. Following Boyes et al. (1998), this measure captures the bureaucratic tendency of the Federal Reserve to expand by expense-preferencing its open market operations revenues. When this expense-preferencing occurs, Congress, as residual claimants of Federal Reserve income, is expected to react, perhaps by threatening the Fed’s prerogatives (e.g., budgetary authority, autonomy, secrecy, etc.) in the legislative arena. It would follow, then, that RTEXPt and THREATt will be positively related. Below, estimation procedures and the regression results are presented.

The present study examines the determinants of legislative threats (from the US Congress) to the Federal Reserve’s prerogatives (e.g., budgetary authority, autonomy, secrecy, etc.). Specifically, two sets of correlates – one relating the Fed’s management of the macro economy and the other to the Fed’s expense preference behavior (i.e., its budget-building activity) – are empirically modeled. Poisson estimates suggest that aspects of both the “macroeconomic model” and the “agency costs/political model” have merit. However, tests of non-nested hypotheses indicate the superiority of the latter model in explaining variations in legislative threats from Congress over time (1964–1993). The latter model states that the Congress, as the residual claimant of the Fed’s open market activities, pays the costs of budget-building activity at the Fed. As such, it is likely to react to this expense-preferencing of Federal Reserve income through legislative threats to the Fed’s prerogatives.