Taking personalities out of monetary policy decision making? Heterogeneity, interactions and committee decisions in the Bank of England’s MPC

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    It is widely believed that setting monetary policy through an individualistic
    majority voting commitee, such as the Bank of England's
    MPC, has important benefits. It is argued that such a monetary policy
    committee can take personalities out of monetary policy decisions,
    while at the same time offering the opportunity to consider and debate
    a range of possible policy responses. Critical to understanding these
    claims would be an assessment of heterogeneity among members of
    the committee and how differences are resolved through the decision
    making process. In this paper, we propose a two-stage model of the
    monetary policy decision making process. Within the context of this
    model, we consider interval censored responses of individual committee
    members when there is both heterogeneity and interaction among
    members. Our empirical results point to heterogeneity in policy responses
    arising from several different sources, as well as interactions
    between committee members.
    Original languageEnglish
    Title of host publicationHeterogeneity, interactions and committee decisions in the Bank of England’s MPC
    Pages1-35
    Number of pages35
    Publication statusPublished - 2011

    Keywords

    • monetary policy
    • interest rates
    • committee decision making
    • expectation-maximisation algorithm
    • spatial weights matrix
    • spatial error model

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