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Inflation Targeting, committee Decision Making and Uncertainty: The case of the Bank of England's MPC

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  • Arnab Bhattacharjee

    (Cambridge University)

  • Sean Holly

    (Cambridge University)

Abstract

Policymaking at the Bank of England has provided detailed information on both the decisions of individual members of the Monetary Policy Committee. We consider this decision making process in the context of a model in which inflation forecast targeting is used but there is heterogeneity among the members of the committee. We find that forecasts of output and inflation provide the best description of discrete changes in interest rates. We find a role for asset prices through the equity market, foreign exchange market and housing prices. There is also identifiable heterogeneity among members of the committee that improves predictabilit
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Suggested Citation

  • Arnab Bhattacharjee & Sean Holly, 2004. "Inflation Targeting, committee Decision Making and Uncertainty: The case of the Bank of England's MPC," Money Macro and Finance (MMF) Research Group Conference 2004 63, Money Macro and Finance Research Group.
  • Handle: RePEc:mmf:mmfc04:63
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    References listed on IDEAS

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    Cited by:

    1. Stephen Hansen & Michael McMahon & Carlos Velasco Rivera, 2013. "How Expoerts Decide: Preferences or Private Assessments on a Monetary Policy Committee?," CESifo Working Paper Series 4201, CESifo Group Munich.
    2. Stephen Hansen & Michael McMahon, 2011. "How Experts Decide: Identifying Preferences versus Signals from Policy Decisions," CEP Discussion Papers dp1063, Centre for Economic Performance, LSE.
    3. Roman Horváth & Katerina Šmídková & Jan Zápal, 2012. "Central Banks' Voting Records and Future Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 1-19, December.
    4. Hansen, Stephen & McMahon, Michael, 2008. "Delayed doves: MPC voting behaviour of externals," LSE Research Online Documents on Economics 19611, London School of Economics and Political Science, LSE Library.
    5. Stephen E. Hansen & Michael McMahon, 2010. "What Do Outside Experts Bring To A Committee? Evidence From The Bank of England," Working Papers 512, Barcelona Graduate School of Economics.
    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. Nojković, Aleksandra & Petrović, Pavle, 2015. "Monetary policy rule in inflation targeting emerging European countries: A discrete choice approach," Journal of Policy Modeling, Elsevier, vol. 37(4), pages 577-595.
    8. Arnab Bhattacharjee & Sean Holly, 2006. "Taking Personalities out of Monetary Policy Decision Making? Interactions, Heterogeneity and Committee Decisions in the Bank of England’s MPC," CDMA Working Paper Series 200612, Centre for Dynamic Macroeconomic Analysis.
    9. Morgunov, V.I., 2016. "The Liquidity Management of the Banking Sector and the Short-Term Money Market Interest Rates," Working Papers 21311, Russian Presidential Academy of National Economy and Public Administration.
    10. 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.

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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