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Policymakers’ Interest Rate Preferences: Recent Evidence for Three Monetary Policy Committees

  • A. Jung

    (European Central Bank)

This paper estimates (pooled) Taylor-type rules based on real-time information for three monetary policy committees: the FOMC, the Bank of England’s MPC, and the Riksbank’s Executive Board. Tests for heterogeneity among committee members provide new empirical evidence on the distribution of policymakers’ interest rate preferences and their individual reaction patterns to economic shocks. For all three committees we find preference heterogeneity to be systematic over the last decade. Policymakers’ preference distributions are found to be consistent with an underlying symmetric normal distribution. Disagreements among members mainly relate to their shortrun response to shocks. Additional cluster analyses exploiting individual response parameters to shocks from the reaction functions show that the membership status (chairman, internal member, external member) explains some of the heterogeneity in members’ preferences and responses.

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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 9 (2013)
Issue (Month): 3 (September)
Pages: 150-197

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Handle: RePEc:ijc:ijcjou:y:2013:q:3:a:5
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  16. 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.
  17. Philippe Moutot & Alexander Jung & Francesco Paolo Mongelli, 2008. "The working of the eurosystem - monetary policy preparations and decision-making – selected issues," Occasional Paper Series 79, European Central Bank.
  18. Alan S. Blinder & John Morgan, 2007. "Leadership in Groups: A Monetary Policy Experiment," NBER Working Papers 13391, National Bureau of Economic Research, Inc.
  19. El-Shagi, Makram & Jung, Alexander, 2013. "Does the Greenspan era provide evidence on leadership in the FOMC?," Working Paper Series 1579, European Central Bank.
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