A decade of dissent: explaining the dissent voting behavior of Bank of England MPC members

Harris, Mark N.; Levine, Paul; Spencer, Christopher

doi:10.1007/s11127-010-9597-6

Cited by 66 publications

(46 citation statements)

References 33 publications

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“…For the MPC, Harris and Spencer (2009) and Harris et al (2011) find evidence that external members have a tendency to prefer easier monetary policy than internals. In the case of the FOMC, some studies conclude that committee members with a "Republican" affiliation tend to vote in favor of a tighter monetary policy stance as opposed to members with a "Democratic" affiliation, who show a tendency to favor an easier monetary policy stance (e.g., Chappell, Havrilesky, & McGregor, 1993;Chappell et al, 1995;Havrilesky & Gildea, 1992Tootell, 1996).…”

Section: Introductionmentioning

confidence: 99%

Regional, individual and political determinants of FOMC members' key macroeconomic forecasts

Eichler

Lähner²

2017

Journal of Forecasting

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We study Federal Open Market Committee members' individual forecasts of inflation and unemployment in the period 1992-2004. Our results imply that Governors and Bank presidents forecast differently, with Governors submitting lower inflation and higher unemployment rate forecasts than bank presidents. For Bank presidents we find a regional bias, with higher district unemployment rates being associated with lower inflation and higher unemployment rate forecasts. Bank presidents' regional bias is more pronounced during the year prior to their elections or for nonvoting bank presidents. Career backgrounds or political affiliations also affect individual forecast behavior. KEYWORDS FOMC, individual characteristics, individual forecasts, regional bias | INTRODUCTIONWe analyze the forecast determinants of Federal Open Market Committee (FOMC) members. Individual forecasts of key macroeconomic factors (such as unemployment and inflation rates) are crucial indicators for determining optimal monetary policy when a forward-looking policy rule is considered. 1 Since the FOMC is a committee consisting of 12 voting members (seven members of the Board of Governors (BoG) 2 and five voting regional Federal Reserve Bank presidents), disagreement about the optimal monetary policy stance (as shown in many studies) not only leads to dissenting votes in the FOMC but may also lead to dispersion of forecasts among FOMC members. Thus analyzing the determinants of real-time inflation and unemployment rate forecasts may improve our understanding of differences in the monetary policy preferences among FOMC members. This paper aims to analyze the determinants of FOMC members' individual inflation and unemployment rate forecasts in the period 1992-2004. We add to the existing literature not only by considering a broadest set of potential regional, individual, and political characteristics, but also by testing determinants (such as career backgrounds, electoral cycles, political affiliation) not previously considered in the FOMC forecasting literature. Our results indicate considerable differences in the economic forecasts between Governors and Bank presidents. Moreover, forecasts of Bank presidents are influenced by the unemployment rate in their 1 Haldane and Batini (1999), as well as Rudebusch and Svensson (1999), compare monetary policy rules and conclude that forward-looking rules including forecasts of inflation instead of actual values can improve monetary policy performance relative to a simple benchmark rule (such as proposed in Taylor, 1993). Clarida, Gali, and Gertler (1998) find that so-called G3 central banks (Germany, Japan, USA) implicitly have followed a type of inflation-targeting regime since 1979, and thus all three central banks indirectly applied a forward-looking framework. Orphanides (2003) find periods -such as during the 1970s or mid-1990s-when a forecast-based rule did an even better job in describing FOMC's monetary policy. Orphanides and Wieland (2008) use a forecast-based Taylor rule framework and conclude...

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Section: Introductionmentioning

confidence: 99%

Regional, individual and political determinants of FOMC members' key macroeconomic forecasts

Eichler

Lähner²

2017

Journal of Forecasting

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“…Notice that the coe cients of our dissent measure in table 5 are positive, statistically signi cant, and of similar magnitude to the corresponding ones in the benchmark regression 15 Gerlach-Kristen (2009) constructs separate measures of dissent for internal and external members and nds that only dissents by outsiders help forecast future policy changes.…”

Section: Predictability Of Interest Rate Decisionsmentioning

confidence: 62%

“…In the former case, this implies that a supermajority prefers b i to i U : This contradicts the initial hypothesis that i U is in U: Suppose instead that b i does not belong to U: This contradicts the hypothesis that i U belongs to the undominated [15] set. We then conclude that if any policy in U is the default at any time 0, that policy must be the nal outcome.…”

Section: Decision Protocolmentioning

confidence: 88%

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Dissent in monetary policy decisions

Riboni

Ruge-Murciá

2014

Journal of Monetary Economics

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Voting records indicate that dissents in monetary policy committees are frequent and predictability regressions show that they help forecast future policy decisions. In order to study whether the latter relation is causal, we construct a model of committee decision making and dissent where members' decisions are not a function of past dissents. The model is estimated using voting data from the Bank of England and the Riksbank. Stochastic simulations show that the decision-making frictions in our model help account for the predictive power of current dissents. The e ect of institutional characteristics and structural parameters on dissent rates is examined using simulations as well. JEL Classi cation: D7, E5

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“…Committee decision making has also been extensively studied by social psychologists and Sibert (2006) provides a discussion of the main findings and how it applies to monetary policy committees. Secondly, there are a number of other papers that specifically study the MPC and internal-external differences within it including Gerlach-Kristen (2003); Bhattacharjee and Holly (2005); Spencer (2006); Besley et al (2008); Harris et al (2011) and Hix et al (2010). As mentioned above, these all focus exclusively on preference differences, with the general conclusion that external members are more dovish the internals.…”

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confidence: 99%

Preferences or private assessments on a monetary policy committee?

Hansen

McMahon

Rivera

2014

Journal of Monetary Economics

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Using Bank of England voting data, we show empirically that members' votes are driven by heterogeneous individual assessments of the economy as well as their individual policy preferences. Estimates indicate that internal committee members form more precise assessments than externals and are also more hawkish. The estimates allow the first quantification of the gain due to information aggregation on monetary policy committees. The marginal gain from additional committee members tapers quickly after five members. There is no evidence of gains through externals' moderating internals' preferences. A relatively small committee of highly informed internal members emerges as a desirable committee structure.Keywords: Committees; monetary policy; private information.JEL Codes: E52, E58, D78 * We are very grateful to the editor Ricardo Reis and an anonymous referee for their insightful suggestions. We would also like to thank Tim Besley, Alan Blinder, Pablo Casas, Fabio Canova, Francesco Caselli, Antonio Ciccone, Greg Crawford, Thomas Cunningham, Wouter den Haan, Nathan Foley-Fisher, Francesco Giavazzi, Charles Goodhart, Matias Iaryczower, Kosuke Imai, Clare Leaver, Gilat Levy, Massimo Motta, Andrew Oswald, Morten Ravn, Karl Schlag, Kevin Sheedy, Jón Steinsson, Thijs van Rens, and members of Kosuke Imai's reading group for insightful comments on this and earlier versions of this work. We have also benefited from the suggestions of seminar participants at the

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A decade of dissent: explaining the dissent voting behavior of Bank of England MPC members

Cited by 66 publications

References 33 publications

Regional, individual and political determinants of FOMC members' key macroeconomic forecasts

Regional, individual and political determinants of FOMC members' key macroeconomic forecasts

Dissent in monetary policy decisions

Preferences or private assessments on a monetary policy committee?

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