Monetary Policy Decisions - Comparing Theory and 'Inside' Information from MPC Members

Abstract

How do monetary policy committee (MPC) members form their views about the appropriate interest rate? To what extent do they change their minds during the deliberations in the interest rate meeting? How important is the Chairman? The theoretical literature makes assumptions about these issues. We have asked actual MPC members in Sweden and Norway. This paper reports the results from this unique survey and discusses how well existing theories on monetary policy by committee capture the reality.

Does the Greenspan era provide evidence on leadership in the FOMC?

“…In addition, the available theoretical models make bold assumptions which would hardly pass a reality-test. Moreover, only few authors have empirically examined the role of the chairman of a monetary policy committee (see Blinder, 2004;Gerlach-Kristen, 2008;Ruge-Murcia, 2008 and2011;Apel, Claussen, Gerlach-Kristen, Lennartsdotter and Røisland, 2013). Blinder (2007) argues that the chairman's role in a monetary policy committee may be linked to its decision-making system.…”

New Zealand Reserve Bank Reform

“…8 The literature is large and can only get the briefest airing here. For a classic overview, see Blinder, 2007. For some recent empirical evidence, with some useful discussion of how insiders see committees working, see Apel et al, 2015. For contemporary Reserve Bank views, see Price and Wadsworth, 2019. 9 The literature on 'deliberative democracy' provides useful summaries of what ideal deliberation might look like and how 'elite' and 'popular' deliberation might fit together.…”

How Much Information Do Monetary Policy Committees Disclose? Evidence from the FOMC's Minutes and Transcripts

“…Empirical work in Chappell et al (2014) using British and Swedish voting records suggest that the governor has little influence over other members at the Bank of England, while he is highly influential at the Riksbank. The later result is at odds with the evidence in Apel et al (2015), who asked serving and former board members of the Riksbank about their perspective on different issues in the literature, including -among other things -the role of the chairperson. They did not give much support to statement that the governor has more influence over forecasts and other materials, or that the governor can influence the policy decision by steering the discussion.…”

“…4 Related work examines the predictability of future policy from central bank minutes, rather than voting records. Apel and Blix Grimaldi (2014) use text analysis to measure the sentiment and tone of the Swedish Central Bank's minutes. They then convert it into an index that measures the degree of "hawkishness" and find that this index can be used to improve predictions of future policy decisions.…”