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Reaction Functions of Bank of England MPC Members: Insiders versus Outsiders

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Author Info

  • Christopher Spencer

    (University of Surrey)

Abstract

In 1997, the Bank of England was granted operational responsibility for setting interest rates to meet a Government inflation target of RPIX 2.5 percent. As part of the shift towards independence, operational decisions on monetary policy were delegated to a Monetary Policy Committee. Using voting data obtained from Minutes of Monetary Policy Committee Meetings, I show that as a group, internally appointed MPC members (insiders) on average prefer higher interest rates than external appointees (outsiders). Further, ordered logit analysis demonstrates that insiders and outsiders are motivated by different concerns when setting interest rates, with the interest rate setting behaviour of outsiders being less easy to predict than those of insiders.

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File URL: http://www.fahs.surrey.ac.uk/economics/discussion_papers/2006/DP06-06.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0606.

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Length: 45 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:sur:surrec:0606

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Keywords: Monetary Policy Committee; insiders; outsiders; voting;

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References

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  1. C. A. E. Goodhart, 2001. "The Inflation Forecast," National Institute Economic Review, National Institute of Economic and Social Research, vol. 175(1), pages 59-66, January.
  2. Ellen E. Meade & D. Nathan Sheets, 2002. "Regional Influences on U.S. Monetary Policy: Some Implications for Europe," CEP Discussion Papers dp0523, Centre for Economic Performance, LSE.
  3. Geraats, Petra M., 2000. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Center for International and Development Economics Research, Working Paper Series qt0hw7h7cp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  4. Budd, Alan, 1998. "The Role and Operations of the Bank of England Monetary Policy Committee," Economic Journal, Royal Economic Society, vol. 108(451), pages 1783-94, November.
  5. John G. Cragg & Russell S. Uhler, 1970. "The Demand for Automobiles," Canadian Journal of Economics, Canadian Economics Association, vol. 3(3), pages 386-406, August.
  6. Chappell, Henry W, Jr & Havrilesky, Thomas M & McGregor, Rob Roy, 1993. "Partisan Monetary Policies: Presidential Influence through the Power of Appointment," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 185-218, February.
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Cited by:
  1. Berk, Jan Marc & Bierut, Beata K., 2011. "Communication in a monetary policy committee," European Journal of Political Economy, Elsevier, vol. 27(4), pages 791-801.
  2. Mark Harris & Paul Levine & Christopher Spencer, 2011. "A decade of dissent: explaining the dissent voting behavior of Bank of England MPC members," Public Choice, Springer, vol. 146(3), pages 413-442, March.
  3. 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).
  4. Brooks, Robert & Harris, Mark & Spencer, Christopher, 2007. "An Inflated Ordered Probit Model of Monetary Policy: Evidence from MPC Voting Data," MPRA Paper 8509, University Library of Munich, Germany.
  5. Stephen Hansen & Michael F. McMahon, 2008. "Delayed Doves: MPC Voting Behaviour of Externals," CEP Discussion Papers dp0862, Centre for Economic Performance, LSE.
  6. 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.

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