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Variety of economic judgment and monetary policy-making by committee

Author

Listed:
  • Sheila Dow

    (University of Stirling)

  • Matthias Klaes

    (Keele University)

  • Alberto Montagnoli

    (University of Stirling)

Abstract

With the increasing attention to how monetary policy is communicated has come a focus on the scope for diverse messages to arise from the committee making the decisions. While the existing literature sees the source of such diversity in relation to a 'correct' decision based on one 'true' model, we explore the implications of diversity as being instead the norm within a pluralist approach to knowledge. By considering judgment as the core of decision-making and uncertainty as conditioning judgment, we develop a theory of decision-making by committee under uncertainty. our case study is the Monetary Policy Committee of the Bank of England. We conclude with a hypothesis about the tendency to policy inaction in different circumstances, notably where there are confident but conflicting judgments within the committee, on the one hand, and where there is agreement that a high level of uncertainty clouds judgment, on the other. This contrasts with the conventional association of diversity of MPC opinion with uncertainty (both as cause and effect).

Suggested Citation

  • Sheila Dow & Matthias Klaes & Alberto Montagnoli, 2009. "Variety of economic judgment and monetary policy-making by committee," SCEME Working Papers: Advances in Economic Methodology 026/2009, SCEME.
  • Handle: RePEc:sti:wpaper:026/2009
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    File URL: http://www.sceme.org.uk/wps/SCEME026_DowKlaesMontagnoli_2009.pdf
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    More about this item

    Keywords

    uncertainty; judgement; ambiguity; central bank communication; monetary policy;

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • 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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