DO UNITED STATES PRESIDENTIAL ADMINISTRATIONS INFLUENCE MONETARY POLICY?

In: Journal of policy modeling: JPMOD ; a social science forum of world issues, Band 14, Heft 2, S. 221-226

Abstract

STUDENTS OF POLITICAL SYSTEMS OFTEN USE THE UNITED STATES TO ILLUSTRATE THE BENEFITS OF THE SEPARATION OF POWERS. THE CONDUCT OF MONETARY AND FISCAL POLICY REPRESENTS ON ECONOMIC ASPECT OF THIS SEPARATION. WHILE ONE CAN ARGUE, ON TECHNICAL GROUNDS, THAT INDEPENDENT SETS OF POLICYMAKERS DETERMINE FISCAL AND MONETARY POLICY, ACTUAL PRACTICE SUGGESTS A CLOSER LINKAGE THAN IS IMPLIED BY THE WRITTEN DOCUMENTATION ON THE INSTITUTIONAL DIVISION OF RESPONSIBILITIES. FIRST, ECONOMIC ANALYSIS IDENTIFIES A NECESSARY LONG-RUN LINKAGE BETWEEN MONETARY AND FISCAL POLICY BECAUSE OF THE GOVERNMENT BUDGET CONSTRAINT. NEW GOVERNMENT DEBT ENTERS THE ECONOMY THROUGH THE BUDGET DEFICIT, WITHOUT WHICH THE STOCK OF GOVERNMENT DEBT CANNOT GROW OVER TIME. THUS, IF ONE DESIRES SOME CONSTANT LONG-RUN RELATIONSHIP BETWEEN OUTSTANDING GOVERNMENT DEBT AND GROSS NATIONAL PRODUCT, THE GOVERNMENT DEFICIT MUST ALSO BE SOME CONSTANT FRACTION OF GROSS NATIONAL PRODUCT. SECONDLY, THE PRESIDENT SUBMITS A BUDGET TO CONGRESS, THE OPENING MOVE IN THE ANNUAL STRUGGLE OVER SPENDING AND TAXING PLANS. MOREOVER, THE PRESIDENT'S POWER TO APPOINT THE CHAIR OF AND FILL VACANCIES ON THE FEDERAL RESERVE BOARD OF GOVERNORS GIVES THE PRESIDENT CONSIDERABLE INFLUENCE OVER THE CONDUCT OF MONETARY POLICY.