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Voting by monetary policy committees: evidence from the CEE inflation-targeting countries

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  • Alexander Jung

    ()
    (European Central Bank)

  • Gergely Kiss

    ()
    (Fitch Ratings)

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 Magyar Nemzeti Bank (the central bank of Hungary) 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 (MPCs) of advanced economies (see Besley et al., 2008; Jung, 2011) suggests that 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 Magyar Nemzeti 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

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2012/2.

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Length: 34 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:mnb:wpaper:2012/2

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Related research

Keywords: central banking; monetary policy committee; inflation targeting; collective decision-making; voting; preferences; pooled regressions;

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References

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  1. Ellen E. Meade, 2005. "The FOMC: preferences, voting, and consensus," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 93-101.
  2. Sibert, Anne, 2001. "Monetary Policy With Uncertain Central Bank Preferences," CEPR Discussion Papers 3113, C.E.P.R. Discussion Papers.
  3. Geoffrey M. B. Tootell, 1991. "Are district presidents more conservative than board governors?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-12.
  4. Lamarche Jean-Francois & Koustasy Zisimos, 2012. "Estimation of a Nonlinear Taylor Rule Using Real-Time U.S. Data," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(5), pages 1-26, December.
  5. Riboni, Alessandro & Ruge-Murcia, Francesco, 2008. "Preference Heterogeneity in Monetary Policy Committees," Economics Papers from University Paris Dauphine 123456789/7717, Paris Dauphine University.
  6. 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.
  7. Owyang, Michael T. & Ramey, Garey, 2001. "Regime Switching and Monetary Policy Measurement," University of California at San Diego, Economics Working Paper Series qt24q32688, Department of Economics, UC San Diego.
  8. Sirchenko, Andrei, 2010. "Policymakers' Votes and Predictability of Monetary Policy," University of California at San Diego, Economics Working Paper Series qt8qj3z3qg, Department of Economics, UC San Diego.
  9. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
  10. Meade, Ellen E & Sheets, D Nathan, 2005. "Regional Influences on FOMC Voting Patterns," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 661-77, August.
  11. Besley, Timothy & Meads, Neil & Surico, Paolo, 2007. "Insiders versus Outsiders in Monetary Policy-Making," Discussion Papers 20, Monetary Policy Committee Unit, Bank of England.
  12. Athanasios Orphanides, 2003. "Historical monetary policy analysis and the Taylor rule," Finance and Economics Discussion Series 2003-36, Board of Governors of the Federal Reserve System (U.S.).
  13. Mihov, Ilian & Sibert, Anne, 2006. "Credibility and Flexibility with Independent Monetary Policy Committees," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 23-46, February.
  14. Michael W. McCracken, 2010. "Disagreement at the FOMC: the dissenting votes are just part of the story," The Regional Economist, Federal Reserve Bank of St. Louis, issue Oct, pages 10-16.
  15. Lin, Shu & Ye, Haichun, 2009. "Does inflation targeting make a difference in developing countries?," Journal of Development Economics, Elsevier, vol. 89(1), pages 118-123, May.
  16. Jacek Kotlowski, 2005. "Reaction functions of the Polish central bankers. A logit approach," Working Papers 18, Department of Applied Econometrics, Warsaw School of Economics.
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Cited by:
  1. Jürgen Stark & Alexander Jung & Francesco Paolo Mongelli, 2012. "Normal Times versus Crisis Times," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 10(1), pages 03-09, 04.
  2. Tim Aldridge & Amy Wood, 2014. "Monetary policy decision-making and accountability structures: some cross-country comparisons," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 77, pages 15-30, March.

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