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Preference heterogeneity in the CEE inflation-targeting countries

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  • Jung, Alexander
  • Kiss, Gergely

Abstract

The aim of this paper is to study preference heterogeneity in monetary policy committees of inflation-targeting (IT) countries in Central and Eastern Europe (CEE) during the period 2005–2010. It employs (individual) voting records of the Monetary Council of the Hungarian National Bank and of the Monetary Policy Council of the National Bank of Poland. Preference heterogeneity in committees is not directly observable. Therefore, we pursue an indirect measurement and conduct an econometric analysis based on (pooled) Taylor-type reaction functions estimated using real-time information on economic and financial indicators and voting records. Recent evidence for the monetary policy committees of advanced economies (see Besley et al., 2008 and Jung, 2011) suggests preference heterogeneity among its members is systematic. Unlike for monetary policy committees of advanced countries, the present paper finds preference heterogeneity to be random for both the members of the Monetary Policy Council of the National Bank of Poland (NBP), and the members of the Monetary Council of the Hungarian central bank (MNB). But, similar to the committees of advanced economies, the diversity of views on the inflation forecast is measurable in both committees. A separate cluster analysis shows that different preferences of MPC members may be attributable to their status (chairman, internal member, external member) and that members may also differ in their desired response to changes in the economic outlook.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 28 (2012)
Issue (Month): 4 ()
Pages: 445-460

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Handle: RePEc:eee:poleco:v:28:y:2012:i:4:p:445-460

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Web page: http://www.elsevier.com/locate/inca/505544

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Keywords: Central Banking; Monetary policy committee; Inflation targeting; Collective decision-making; Voting; Preferences; Pooled regressions;

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References

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Cited by:
  1. Potrafke, Niklas, 2013. "Minority positions in the German Council of Economic Experts: A political economic analysis," Munich Reprints in Economics 19290, University of Munich, Department of Economics.
  2. Eijffinger, S.C.W. & Mahieu, R.J. & Raes, L.B.D., 2013. "Estimating the Preferences of Central Bankers: An Analysis of Four Voting Records," Discussion Paper 2013-047, Tilburg University, Center for Economic Research.

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