An Inflated Ordered Probit Model of Monetary Policy: Evidence from MPC Voting Data

Robert Brooks, Mark Harris and Christopher Spencer

MPRA Paper from University Library of Munich, Germany

Abstract: Even in the face of a continuously changing economic environment, interest rates often remain unadjusted for long periods. When rates are moved, the norm is for a series of small unidirectional discrete basis-point changes. To explain these phenomena we suggest a two-equation system combining a “long-run” equation explaining a binary decision to change or not change the interest-rate, and a “shortrun” one based on a simple monetary policy rule. We account for unobserved heterogeneity in both equations, applying the model to unique unit-record level data on the voting preferences of Bank of England Monetary Policy Committee (MPC) members.

Keywords: Interest rates; voting; discrete data; ordered models; inflated outcomes; monetary policy committee (search for similar items in EconPapers)
JEL-codes: C2 E5 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-cba, nep-dcm, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8509

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