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Voting by monetary policy committees: evidence from the CEE inflation-targeting countries

  • Alexander Jung

    ()

    (European Central Bank)

  • Gergely Kiss

    ()

    (Fitch Ratings)

The aim of this paper is to study preference heterogeneity in monetary policy committees of inflation-targeting (IT) countries in Central and Eastern Europe (CEE) during the period 2005–2010. It employs (individual) voting records of the Monetary Council of the Magyar Nemzeti Bank (the central bank of Hungary) and of the Monetary Policy Council of the National Bank of Poland. Preference heterogeneity in committees is not directly observable. Therefore, we pursue an indirect measurement and conduct an econometric analysis based on (pooled) Taylor-type reaction functions estimated using real-time information on economic and financial indicators and voting records. Recent evidence for the monetary policy committees (MPCs) of advanced economies (see Besley et al., 2008; Jung, 2011) suggests that preference heterogeneity among its members is systematic. Unlike for monetary policy committees of advanced countries, the present paper finds preference heterogeneity to be random for both the members of the Monetary Policy Council of the National Bank of Poland (NBP), and the members of the Monetary Council of the Magyar Nemzeti Bank (MNB). But, similar to the committees of advanced economies, the diversity of views on the inflation forecast is measurable in both committees. A separate cluster analysis shows that different preferences of MPC members may be attributable to their status (chairman, internal member, external member) and that members may also differ in their desired response to changes in the economic outlook.

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File URL: http://www.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbfuzetek/WP_2012-02.pdf
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Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2012/2.

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Length: 34 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:mnb:wpaper:2012/2
Contact details of provider: Web page: http://www.mnb.hu/

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  1. Lin, Shu & Ye, Haichun, 2009. "Does inflation targeting make a difference in developing countries?," Journal of Development Economics, Elsevier, vol. 89(1), pages 118-123, May.
  2. Zisimos Koustas & Jean-Francois Lamarche, 2010. "Estimation of a nonlinear Taylor rule using real-time U.S. data," Working Papers 1005, Brock University, Department of Economics.
  3. Jacek Kotlowski, 2005. "Reaction functions of the Polish central bankers. A logit approach," Working Papers 18, Department of Applied Econometrics, Warsaw School of Economics.
  4. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
  5. Besley, Timothy & Meads, Neil & Surico, Paolo, 2007. "Insiders versus Outsiders in Monetary Policy-Making," Discussion Papers 20, Monetary Policy Committee Unit, Bank of England.
  6. Alessandro Riboni & Francisco Ruge-Murcia, 2007. "Preference heterogeneity in monetary policy committees," DNB Working Papers 157, Netherlands Central Bank, Research Department.
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  8. Owyang, Michael T. & Ramey, Garey, 2001. "Regime Switching and Monetary Policy Measurement," University of California at San Diego, Economics Working Paper Series qt24q32688, Department of Economics, UC San Diego.
  9. Christopher Spencer, 2006. "Reaction Functions of Bank of England MPC Members: Insiders versus Outsiders," School of Economics Discussion Papers 0606, School of Economics, University of Surrey.
  10. Sibert, Anne, 2002. "Monetary policy with uncertain central bank preferences," European Economic Review, Elsevier, vol. 46(6), pages 1093-1109, June.
  11. 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.
  12. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
  13. Ellen E. Meade, 2005. "The FOMC: preferences, voting, and consensus," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 93-101.
  14. Andrei Sirchenko, 2011. "Policymakers' Votes and Predictability of Monetary Policy," Economics Working Papers ECO2011/05, European University Institute.
  15. Geoffrey M. B. Tootell, 1991. "Are district presidents more conservative than board governors?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-12.
  16. Meade, Ellen E & Sheets, D Nathan, 2005. "Regional Influences on FOMC Voting Patterns," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 661-77, August.
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