Presidential Politics and Monetary Policy: Lessons from the 1896 Election

Abstract: The U.S. presidential election of 1896 provides an excellent natural experiment to measure the impact of exchange-rate uncertainty on bank balance sheets and the broader economy. The evidence suggests that the election's contentious free-silver debate significantly constrained banking activity and real economic activity by creating greater uncertainty about U.S. commitment to the gold standard. This finding reinforces the modern-day wisdom of insulating monetary policy from politics.

Keywords: presidential election; monetary policy;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2020-02

Issue: 20-02

Pages: 5