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Uncertainty and voting on the Bank of England’s Monetary Policy Committee

Author

Listed:
  • Firrell, Alastair

    (Bank of England)

  • Reinold, Kate

    (Bank of England)

Abstract

Differences of opinion are a natural and vital part of monetary policy making by committee. With the appropriate stance for monetary policy both unobservable and uncertain, individual policymakers need to synthesise a wide range of information, including the views of other committee members. Using a novel measure of views that we construct from text analysis of the Bank of England Monetary Policy Committee’s minutes and speeches, we show that both individual economic assessments and broader committee views are important in explaining individual voting. But in periods of high uncertainty both become more volatile and carry less weight in votes, consistent with the predictions of a simple voting model embedding a signal extraction problem. There is no increase in the dispersion of economic assessments in periods of uncertainty, nor in the mean dissent rate. Thus we show that interpreting the voting record as a reflection of policy uncertainty is unreliable, and highlight the value of individual committee members’ communications — such as speeches — for conveying differences in view.

Suggested Citation

  • Firrell, Alastair & Reinold, Kate, 2020. "Uncertainty and voting on the Bank of England’s Monetary Policy Committee," Bank of England working papers 898, Bank of England.
  • Handle: RePEc:boe:boeewp:0898
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    References listed on IDEAS

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    More about this item

    Keywords

    Central bank communication; committees; monetary policy; uncertainty;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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