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How Experts Decide: Identifying Preferences versus Signals from Policy Decisions

  • Stephen Hansen
  • Michael McMahon

A large theoretical literature assumes that experts di ffer in terms of preferences and the distribution of their private signals, but the empirical literature to date has not separately identi ed them. This paper proposes a novel way of doing so by relating the probability a member chooses a particular policy decision to the prior belief that it is correct. We then apply this methodology to study diff erences between internal and external members on the Bank of England's Monetary Policy Committee. Using a variety of proxies for the prior, we provide evidence that they di ffer significantly on both dimensions.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1063.

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Date of creation: Jul 2011
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Handle: RePEc:cep:cepdps:dp1063
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  1. Francisco Ruge-Murcia & Alessandro Riboni, 2008. "Monetary Policy by Committee: Consensus, Chairman Dominance or Simple Majority?," 2008 Meeting Papers 142, Society for Economic Dynamics.
  2. Sean Holly & Arnab Bhattacharjee, 2005. "Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England's MPC," Computing in Economics and Finance 2005 119, Society for Computational Economics.
  3. Besley, Timothy & Meads, Neil & Surico, Paolo, 2007. "Insiders versus Outsiders in Monetary Policy-Making," Discussion Papers 20, Monetary Policy Committee Unit, Bank of England.
  4. 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.
  5. Kiel, Alexandra & Gerling, Kerstin & Schulte, Elisabeth & Grüner, Hans Peter, 2003. "Information acquisition and decision making in committees: a survey," Working Paper Series 0256, European Central Bank.
  6. 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.
  7. Alan S. Blinder, 2005. "Monetary Policy by Committee: Why and How?," Working Papers 84, Princeton University, Department of Economics, Center for Economic Policy Studies..
  8. Petra Gerlach-Kristen, 2009. "Outsiders at the Bank of England's MPC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1099-1115, 09.
  9. EllenE. Meade & David Stasavage, 2008. "Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve," Economic Journal, Royal Economic Society, vol. 118(528), pages 695-717, 04.
  10. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
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