The Tempered Ordered Probit (TOP) model with an application to monetary policy

William Greene, Max Gillman, Mark Harris and Christopher Spencer

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: We propose a Tempered Ordered Probit (TOP) model. Our contribution lies not only in explicitly accounting for an excessive number of observations in a given choice category - as is the case in the standard literature on in?ated models; rather, we introduce a new econometric model which nests the recently developed Middle In?ated Ordered Probit (MIOP) models of Bagozzi and Mukherjee (2012) and Brooks, Harris, and Spencer (2012) as a special case, and further, can be used as a speci?cation test of the MIOP, where the implicit test is described as being one of symmetry versus asymmetry. In our application, which exploits a panel data-set containing the votes of Bank of England Monetary Policy Committee (MPC) members, we show that the TOP model a¤ords the econometrician considerable ?exibility with respect to modelling the impact of di¤erent forms of uncertainty on interest rate decisions. Our ?ndings, we argue, reveal MPC members? asymmetric attitudes towards uncertainty and the changeability of interest rates.

Keywords: Monetary policy committee; voting; discrete data; uncertainty; tempered equations. (search for similar items in EconPapers)
JEL-codes: C3 E50 (search for similar items in EconPapers)
Date: 2013-09, Revised 2013-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: The Tempered Ordered Probit (TOP) Model with an Application to Monetary Policy (2013)
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