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Rational Partisan Theory, Uncertainty and Spatial Voting: Evidence for the Bank of England’s MPC

Arnab Bhattacharjee () and Sean Holly ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

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 rational partisan theory can explain spatial voting behaviour under forecast uncertainty about the output gap. Internally generated forecasts of output and market generated expectations of medium term inflation provide the best description of discrete changes in interest rates, in combination with uncertainty in the macroeconomic environment. There is also a role for developments in asset housing and labour markets. Further, spatial voting patterns clearly differentiates between internal and externally appointed members of the Monetary Policy Committee. The results have important implications for committee design and the conduct of monetary policy.

Keywords: Monetary policy; interest rates; Monetary Policy Committee; Committee decision making (search for similar items in EconPapers)
JEL-codes: E42 E43 E50 E58 (search for similar items in EconPapers)
Date: 2010-01-22
New Economics Papers: this item is included in nep-cba, nep-cdm, nep-mac and nep-mon
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Citations: View citations in EconPapers (13) Track citations by RSS feed

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Journal Article: RATIONAL PARTISAN THEORY, UNCERTAINTY, AND SPATIAL VOTING: EVIDENCE FOR THE BANK OF ENGLAND'S MPC (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1002

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