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Policymakers' Votes and Predictability of Monetary Policy

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  • Sirchenko, Andrei

Abstract

The National Bank of Poland does not publish the Monetary Policy Council's voting records before the subsequent policy meeting. Using real-time data, this paper shows that a prompter release of the voting records could improve the predictability of policy decisions. The voting patterns reveal strong and robust predictive content even after controlling for policy bias and responses to inflation, real activity, exchange rates and financial market information. They contain information not embedded in the spreads and moves in the market interest rates, nor in the explicit forecasts of the next policy decision made by market analysts in Reuters surveys. Moreover, the direction of policymakers' dissent explains the direction of analysts' forecast bias. These findings are based on the voting patterns only, without the knowledge of policymakers' names.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt8qj3z3qg.

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Date of creation: 05 Dec 2010
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Handle: RePEc:cdl:ucsdec:qt8qj3z3qg

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Keywords: monetary policy; interest rate; predictability; voting; real-time data; Social and Behavioral Sciences;

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References

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  1. Chesher, Andrew & Irish, Margaret, 1987. "Residual analysis in the grouped and censored normal linear model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 33-61.
  2. Alan Blinder, 2009. "Talking about monetary policy: the virtues (and vice?) of central bank communication," BIS Working Papers 274, Bank for International Settlements.
  3. 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.
  4. Athanasios Orphanides & John C. Williams, 2006. "Inflation Targeting under Imperfect Knowledge," Computing in Economics and Finance 2006 38, Society for Computational Economics.
  5. Philipp Maier, 2007. "Monetary Policy Committees in Action: Is There Room for Improvement?," Working Papers 07-6, Bank of Canada.
  6. Reeves, Rachel & Sawicki, Michael, 2007. "Do financial markets react to Bank of England communication?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 207-227, March.
  7. Sirchenko Andrey, 2008. "Modeling monetary policy in real time:Does discreteness matter?," EERC Working Paper Series 08/07e, EERC Research Network, Russia and CIS.
  8. Hayo, Bernd & Neuenkirch, Matthias, 2010. "Do Federal Reserve communications help predict federal funds target rate decisions?," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1014-1024, December.
  9. Timothy Besley & Neil Meads & Paolo Surico, 2008. "Insiders versus outsiders in monetary policymaking," LSE Research Online Documents on Economics 33743, London School of Economics and Political Science, LSE Library.
  10. Hahn, Volker & Gersbach, Hans, 2001. "Should the Individual Voting Records of Central Bankers be Published?," Discussion Paper Series 1: Economic Studies 2001,02, Deutsche Bundesbank, Research Centre.
  11. Petra Geraats, 2005. "Transparency of Monetary Policy: Theory and Practice," CESifo Working Paper Series 1597, CESifo Group Munich.
  12. Blinder, Alan S. & Ehrmann, Michael & de Haan, Jakob & Fratzscher, Marcel & Jansen, David-Jan, 2008. "Central Bank communication and monetary policy: a survey of theory and evidence," Working Paper Series 0898, European Central Bank.
  13. Blinder, Alan S., 2007. "Monetary policy by committee: Why and how?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 106-123, March.
  14. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32.
  15. W.H. Buiter, 1999. "Alice in Euroland," CEP Discussion Papers dp0423, Centre for Economic Performance, LSE.
  16. Jakob de Haan & Sylvester C.W. Eijffinger, 2000. "The Democratic Accountability of the European Central Bank: A Comment on Two Fairy-tales," Journal of Common Market Studies, Wiley Blackwell, vol. 38(3), pages 393-407, 09.
  17. Petra Gerlach-Kristen & Ellen E. Meade, 2010. "Is There a Limit on FOMC Dissents? Evidence from the Greenspan Era," Working Papers 2010-16, American University, Department of Economics.
  18. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
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Cited by:
  1. Roman Horvath & Katerina Smidkova & Jan Zapal, 2010. "Central Banks' Voting Records and Future Policy," Working Papers 2010/11, Czech National Bank, Research Department.
  2. Eijffinger, Sylvester C W & Mahieu, Ronald J & Raes, Louis, 2013. "Estimating the preferences of central bankers: an analysis of four voting records," CEPR Discussion Papers 9602, C.E.P.R. Discussion Papers.
  3. Jung, Alexander & Kiss, Gergely, 2012. "Preference heterogeneity in the CEE inflation-targeting countries," European Journal of Political Economy, Elsevier, vol. 28(4), pages 445-460.
  4. Sirchenko Andrei, 2012. "A model for ordinal responses with an application to policy interest rate," EERC Working Paper Series 12/13e, EERC Research Network, Russia and CIS.
  5. Alexander Jung & Gergely Kiss, 2012. "Voting by monetary policy committees: evidence from the CEE inflation-targeting countries," MNB Working Papers 2012/2, Magyar Nemzeti Bank (the central bank of Hungary).

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