Abstract

The relationship between political dynamics and monetary policy decisions in the United States is a topic of considerable importance and complexity. This study quantifies the interaction of party control, the timing of the Humphrey Hawkins report, and federal interest rates, with the goal of enhancing our understanding of the dynamics that shape monetary policy within a political context. Utilizing ordinary least squares multivariate regression analysis, the study examines 832 observations of monthly federal interest rates with degrees of interbranch control, and monthly national unemployment levels.

The findings indicate that party control alone does not have a significant impact on interest rate fluctuations. However, when there is alignment between the presidential party and both houses of Congress, there is a notable decrease in federal interest rates. Interestingly, the hypothesized interaction between party control and Humphrey Hawkins report timing did not yield significant results. Methodological considerations, such as variable operationalization and data limitations, may have influenced the results. Furthermore, the relatively low R-squared value indicates that the variables included in the model explain only a small fraction of the observed variability in interest rates, suggesting the presence of unaccounted-for factors.

Despite these limitations, the study offers valuable insights into the complexities of monetary policy decision-making and emphasizes the significance of considering multiple factors when analyzing interest rate adjustments. Further research is necessary to address the outlined limitations and achieve a more comprehensive understanding of the factors that influence federal interest rates.


Advisor

Coll, Joseph

Department

Political Science

Disciplines

American Politics | Political Economy

Keywords

Federal Reserve, Party Control, Federal Interest Rates

Publication Date

2024

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

Download

Share

COinS
 

© Copyright 2024 Zachary Galdo