Assessing the interaction between central bank behaviour and fiscal policy in the United States *

In the United States, the central bank is statutorily independent of the executive branch. While the president appoints the seven-man Board of Governors of the Federal Reserve System, these appointments are for staggered, non-renewable fourteen-year terms, so as to limit the influence any one president can have on the composition of this Board. While early resignations have at times allowed even a single-term president (e.g. Carter) to appoint a majority of the Board of Governors, it should be added that the key policy-making body, the Federal Open Market Committee, includes not only the Board of Governors but also five of the 12 presidents of the regional reserve banks – who are appointed by the district banks themselves, subject to approval by the Chairman of the Board of Governors.