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What do outside experts bring to a committee? Evidence from the Bank of England

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We test whether outside experts have information not available to insiders by using the voting record of the Bank of England's Monetary Policy Committee. Members with more private information should vote more often against conventional wisdom, which we measure as the average belief of market economists about future interest rates. We find evidence that external members indeed have information not available to internals, but also use a quasi-natural experiment to show they may exaggerate their expertise to obtain reappointment. This implies that an optimal committee, even outside monetary policy, should potentially include outsiders, but needs to manage career concerns.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1238.

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Date of creation: Oct 2010
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Handle: RePEc:upf:upfgen:1238

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Web page: http://www.econ.upf.edu/

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Keywords: Expert Behavior; Committees; Monetary Policy.;

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  1. RIBONI, Alessandro & RUGE-MURCIA, Francisco J., 2008. "Monetary Policy by Committee: Consensus, Chairman Dominance or Simple Majority?," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 02-2008, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Kiel, Alexandra & Gerling, Kerstin & Schulte, Elisabeth & Grüner, Hans Peter, 2003. "Information acquisition and decision making in committees: a survey," Working Paper Series, European Central Bank 0256, European Central Bank.
  3. 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, Springer, vol. 146(3), pages 413-442, March.
  4. Stephen Hansen & Michael F. McMahon, 2008. "Delayed Doves: MPC Voting Behaviour of Externals," CEP Discussion Papers dp0862, Centre for Economic Performance, LSE.
  5. Bhattacharjee, A. & Holly, S., 2005. "Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England’s MPC," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0530, Faculty of Economics, University of Cambridge.
  6. Besley, Timothy & Meads, Neil & Surico, Paolo, 2007. "Insiders versus Outsiders in Monetary Policy-Making," Discussion Papers, Monetary Policy Committee Unit, Bank of England 20, Monetary Policy Committee Unit, Bank of England.
  7. Bauke Visser & Otto H Swank, 2007. "On Committees of Experts," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(1), pages 337-372, 02.
  8. Petra Gerlach-Kristen, 2009. "Outsiders at the Bank of England's MPC," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(6), pages 1099-1115, 09.
  9. Christopher Spencer, 2006. "The Dissent Voting Behaviour of Bank of England MPC Members," School of Economics Discussion Papers, School of Economics, University of Surrey 0306, School of Economics, University of Surrey.
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Cited by:
  1. 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, Reserve Bank of New Zealand, vol. 77, pages 15-30, March.
  2. Bernd Hayo & Ummad Mazhar, 2011. "Monetary Policy Committee Transparency: Measurement,Determinants, and Economic Effects," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201140, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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