Does lifetime experience influence FOMC votes?

There is a new paper by Malmandier, Nagel, and Yan (pdf) on that question, it seems the answer is yes, here is the abstract:

We show that personal lifetime experiences of inflation significantly affect the hawkish or dovish leanings of central bankers. We link experience-based inflation expectations to the desired level of nominal interest rates using a forward-looking formulation of the Taylor rule. Using data of the FOMC voting history from March 1951 to January 2014, we estimate that a one standard-deviation increase in experience-based forecasts increases the unconditional probability of a hawkish dissent by about one third, and decreases the unconditional probability of a dovish dissent also by about one third. FOMC members also use significantly a more hawkish tone in their speeches if they have experienced high inflation in their lives so far. Aggregating over all FOMC members present at a meeting, we establish a significantly positive relationship between their average inflation experience and the Fed Funds Rate target decided at the meeting. Finally, inflation experiences have a strong direct impact on FOMC members’ inflation forecasts as reported in their semiannual Monetary Policy Reports to Congress, suggesting that experiences affect beliefs. Our findings imply that even professionals are affected by their lifetime experiences of macroeconomic outcomes and shed new light on the importance of FOMC appointments.

This is from their conclusion:

This evidence adds to a growing literature on the role of ‘experience effects’, a term first coined by Malmendier and Nagel (2011) in the context of stock-market investment. What is still debated is whether such influences are weaker among more highly educated decision-makers or even experts. Our results here suggest that this is not necessarily the case.

I would expect such effects to be stronger for the better-educated and the experts.  We are more a prisoner of our prisms, just as we are more likely to have strong prisms in the first place.


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