Career Concerns in Collective Decision-Making: The Federal Open Market Committee

In this paper, we quantify the distortions induced by career concerns within the Federal Open Market Committee (FOMC). We combine a structural approach with an unanticipated change in the information available to the public about internal committee deliberations. We show that—given the policy preferences of Fed Presidents and Board Governors serving in the FOMC—agents' incentives to appear competent and unbiased outweigh the distortions induced by anti-pandering and conformity. Relative to a counterfactual with no reputational considerations, career concerns improve the welfare of an unbiased principal. Given our estimates of career concerns, Transparency improves welfare relative to an Opaque regime in which internal deliberations are not made public. In a counterfactual exercise, we show that greater heterogeneity in regional shocks reduces conformity but increases policy errors under Transparency.