The Dynamic Voting Patterns of the Bank of England's MPC

Abstract

The literature on the behavior of the Bank of England's Monetary Policy Committee (MPC) has focused on static voting patterns. We find statistical support for a dynamic pattern using a panel reaction function to analyze MPC votes over the 1997-2008 period. We find that internal and external members do not behave differently in their first year on the MPC. In their third year of tenure, internal members prefer higher policy rates, placing a higher weight on price stability and a lower weight on the output gap than external members.

Uncertainty and the Bank of England's MPC

“…Policymakers' reactions to this uncertainty measure generate spatial voting patterns that distinguish between internal and external MPC members and are associated with a more accommodative monetary policy stance. This latter effect is reported in Berk, Bierut, and Meade (2010), who find that the probability of voting to reduce the policy rate is heightened when there is an increase in the standard deviation associated with consensus forecasts of inflation.…”

“…This is due to their findings aligning very closely with those based on a fixed effects heterogeneity approach. 828 : MONEY, CREDIT AND BANKING Berk, Bierut, and Meade (2010), who find that the probability of voting to reduce the policy rate is heightened when there is an increase in the standard deviation associated with consensus forecasts of inflation. 4 Brooks, Harris, and Spencer (2012) find that higher levels of inflation forecast uncertainty are associated with the adoption of "wait-and-see" monetary policy, in that policymakers are more reluctant to vote for a change in the policy stance; alternative uncertainty measures, such as the volatility of the FTSE 100, are associated with increasing the probability of changing the policy stance.…”

The dissent voting behaviour of central bankers: what do we really know?

“…The typical explanations of this conformity involve informational influences among the group members and/or a potentially dissenting group member's fear of being left out or viewed negatively by other group members (Brown, 2000, Chapter 4). In accordance with this reasoning, Berk et al (2010) find that differences in the voting behaviours of internal and external members of the Bank of England's (BoE) Monetary Policy Committee (MPC) only begin to occur after at least three years of service on this committee. However, differences among monetary policy decisionmakers can arise either because these decision-makers have different preferences or because they possess different information.…”

An International Comparison of Voting by Committees

“…Another strand of the literature (see Gerlach-Kristen 2006, and Bhattacharjee and Holly 2006, and Fuijiki 2005 suggests that in committees comprising "internal" and "external" members, "external" members more often show disagreement with the policy decision. A recent study by Berk, Bierut and Meade (2010) suggests that these differences would be mainly related to the end of their tenure. By contrast, the voting behaviour of the Riksbank's Executive Board, which comprises only "internal" members, shows that all members are active dissenters (see Ekici 2009).…”