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How Experts Decide : Identifying Preferences versus Signals from Policy Decisions

Author

Listed:
  • Hansen, Stephen

    (Universitat Pompeu Fabra)

  • McMahon, Michael

    (University of Warwick)

Abstract

A large theoretical literature assumes that experts differ in terms of preferences and the distribution of their private signals, but the empirical literature to date has not separately identified 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 differences 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 differ significantly on both dimensions. Key words: Bayesian decision making ; Committees ; Monetary policy JEL classification: D81 ; D82 ; E52

Suggested Citation

  • Hansen, Stephen & McMahon, Michael, 2011. "How Experts Decide : Identifying Preferences versus Signals from Policy Decisions," The Warwick Economics Research Paper Series (TWERPS) 963, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:963
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2011/twerp_963.pdf
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    Cited by:

    1. Roman Horvath & Marek Rusnak & Katerina Smidkova & Jan Zapal, 2014. "The dissent voting behaviour of central bankers: what do we really know?," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 450-461, February.
    2. Stephen Hansen & Michael McMahon, 2016. "First Impressions Matter: Signalling as a Source of Policy Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(4), pages 1645-1672.
    3. Vidal, Jean-Pierre & Maurin, Vincent, 2012. "Monetary policy deliberations: committee size and voting rules," Working Paper Series 1434, European Central Bank.
    4. Eijffinger, Sylvester & Mahieu, Ronald & Raes, Louis, 2018. "Inferring hawks and doves from voting records," European Journal of Political Economy, Elsevier, vol. 51(C), pages 107-120.

    More about this item

    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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