A multinominal logit analysis of the influence of policy variables and board experience on FOMC voting behavior

Previous studies have used probit or logit models to analyze two states of monetary policy (tighter or looser). In this paper we employ multinominal logit to permit Federal Reserve monetary policy to assume one of three alternative states (tighter, looser, or no change) as a function of three independent economic variables (unemployment, real growth, and inflation) and the amount of experience of the Board of Governors. The results indicate that the Federal Reserve reacted differently under Burns, Miller and Volcker and between Volcker's two operating procedures in the formulation of monetary policy.