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Uncertainty and voting on the Bank of England’s Monetary Policy Committee

Alastair Firrell () and Kate Reinold ()
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Alastair Firrell: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Kate Reinold: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 898, Bank of England working papers from Bank of England

Abstract: Differences of opinion are a natural and vital part of monetary policy making by committee. With the appropriate stance for monetary policy both unobservable and uncertain, individual policymakers need to synthesise a wide range of information, including the views of other committee members. Using a novel measure of views that we construct from text analysis of the Bank of England Monetary Policy Committee’s minutes and speeches, we show that both individual economic assessments and broader committee views are important in explaining individual voting. But in periods of high uncertainty both become more volatile and carry less weight in votes, consistent with the predictions of a simple voting model embedding a signal extraction problem. There is no increase in the dispersion of economic assessments in periods of uncertainty, nor in the mean dissent rate. Thus we show that interpreting the voting record as a reflection of policy uncertainty is unreliable, and highlight the value of individual committee members’ communications — such as speeches — for conveying differences in view.

Keywords: Central bank communication; committees; monetary policy; uncertainty (search for similar items in EconPapers)
JEL-codes: D71 D81 E52 E58 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2020-12-18
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0898

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