Inflation Targeting, Committee Decision Making and Uncertainty: The Case of the Bank of England’s MPC

Arnab Bhattacharjee () and Sean Holly ()

CDMA Working Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: The transparency and openness of the monetary policymaking process at the Bank of England has provided very detailed information on both the decisions of individual members of the Monetary Policy Committee and the information on which they are based. In this paper we consider this decision making process in the context of a model in which inflation forecast targeting is used but there is heterogeneity among the members of the committee. We find that internally generated forecasts of output and market generated expectations of medium term inflation provide the best description of discrete changes in interest rates. We also find a role for asset prices through the equity market, foreign exchange market and housing prices. There are also identifiable forms of heterogeneity among members of the committee that improves the predictability of interest rate changes. This can be thought of as supporting the argument that full transparency of monetary policy decision making can be welfare enhancing.

Keywords: Intertemporal macro; Monetary policy; interest rates; monetary policy committee; committee decision making. (search for similar items in EconPapers)
JEL-codes: E42 E43 E50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2005-02
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Related works:
Working Paper: Inflation Targeting, committee Decision Making and Uncertainty: The case of the Bank of England's MPC (2004)
Working Paper: Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England's MPC (2005)
Working Paper: Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England’s MPC (2005)
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