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Insiders versus outsiders in monetary policymaking

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  • Besley, Timothy
  • Meads, Neil
  • Surico, Paolo

Abstract

This paper looks at the voting patterns of internal and external members of the MPC to investigate how far there are differences between insiders and outsiders. We make three contributions. First, we assess the extent to which the Bank of England internally generated forecasts explain the MPC members' voting decisions. This is important as generating forecasts on a quarterly basis is a key part of the process used by the Bank of England. The forecast for inflation is made public in the Inflation Report while the output gap forecast is not. Second, we use a random coefficient method of estimation in which the parameters of the interest rate rule are allowed, but not required, to be different across members. Third, we find evidence of some heterogeneity in the intercept, a measure of experience on the MPC and the interest rate smoothing parameter, but no significant differences in the members' reaction to the forecasts of inflation and the output gap.
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Suggested Citation

  • Besley, Timothy & Meads, Neil & Surico, Paolo, 2008. "Insiders versus outsiders in monetary policymaking," LSE Research Online Documents on Economics 33743, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:33743
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    References listed on IDEAS

    as
    1. Alessandro Riboni & Francisco J. Ruge-Murcia, 2008. "Preference Heterogeneity in Monetary Policy Committees," International Journal of Central Banking, International Journal of Central Banking, vol. 4(1), pages 213-233, March.
    2. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    3. Hansen, Stephen & McMahon, Michael, 2008. "Delayed doves: MPC voting behaviour of externals," LSE Research Online Documents on Economics 19611, London School of Economics and Political Science, LSE Library.
    4. Hix, Simon & Hoyland, Bjorn & Vivyan, Nick, 2007. "From doves to hawks: a spatial analysis of voting in the Monetary Policy Committee of the Bank of England, 1997-2007," LSE Research Online Documents on Economics 25199, London School of Economics and Political Science, LSE Library.
    5. Groth, Charlotta & Wheeler, Tracy, 2008. "The behaviour of the MPC: Gradualism, inaction and individual voting patterns," Discussion Papers 21, Monetary Policy Committee Unit, Bank of England.
    6. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    7. Christopher Spencer, 2006. "Reaction Functions of Bank of England MPC Members: Insiders versus Outsiders," School of Economics Discussion Papers 0606, School of Economics, University of Surrey.
    8. Christopher Spencer, 2006. "The Dissent Voting Behaviour of Bank of England MPC Members," School of Economics Discussion Papers 0306, School of Economics, University of Surrey.
    9. Alessandro Riboni & Francisco J. Ruge-Murcia, 2008. "Preference Heterogeneity in Monetary Policy Committees," International Journal of Central Banking, International Journal of Central Banking, vol. 4(1), pages 213-233, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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