WORDS AND DEEDS: SYMBOLIC POLITICS AND DECISION MAKING AT THE FEDERAL RESERVE

The Fed has often been accused of using ambiguity, concealment, and deception when it is subject to intense scrutiny and pressure. We investigate this issue by examining the relationship between the Fed's policy statements and its subsequent use of a key policy instrument, the federal funds rate. Our analysis shows that the Fed usually does what it says it will do during times of economic distress (recessions), but that its actions are more inclined to diverge from its stated intent when a sluggish economy coincides with presidential elections.