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Insiders versus Outsiders in Monetary Policy-Making

Author

Listed:
  • Timothy Besley

    (Monetary Policy Committee Unit, Bank of England)

  • Neil Meads

    (Monetary Policy Committee Unit, Bank of England)

  • Paolo Surico

    (Monetary Policy Committee Unit, Bank of England)

Abstract

This paper looks at the voting patterns of internal and external members of the MPC to investigate how far there are differences between insiders and outsiders. We make three contributions. First, we assess the extent to which the Bank of England internally generated forecasts explain the MPC members' voting decisions. This is important as generating forecasts on a quarterly basis is a key part of the process used by the Bank of England. The forecast for inflation is made public in the Inflation Report while the output gap forecast is not. Second, we use a random coefficient method of estimation in which the parameters of the interest rate rule are allowed, but not required, to be different across members. Third, we find evidence of some heterogeneity in the intercept, a measure of experience on the MPC and the interest rate smoothing parameter, but no significant differences in the members' reaction to the forecasts of inflation and the output gap.

Suggested Citation

  • Timothy Besley & Neil Meads & Paolo Surico, 2007. "Insiders versus Outsiders in Monetary Policy-Making," Discussion Papers 20, Monetary Policy Committee Unit, Bank of England.
    • Handle: RePEc:mpc:wpaper:0020
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    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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