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Variety of economic judgment and monetary policy-making by committee

Sheila Dow, Matthias Klaes and Alberto Montagnoli ()

No 026/2009, SCEME Working Papers: Advances in Economic Methodology from SCEME

Abstract: With the increasing attention to how monetary policy is communicated has come a focus on the scope for diverse messages to arise from the committee making the decisions. While the existing literature sees the source of such diversity in relation to a 'correct' decision based on one 'true' model, we explore the implications of diversity as being instead the norm within a pluralist approach to knowledge. By considering judgment as the core of decision-making and uncertainty as conditioning judgment, we develop a theory of decision-making by committee under uncertainty. our case study is the Monetary Policy Committee of the Bank of England. We conclude with a hypothesis about the tendency to policy inaction in different circumstances, notably where there are confident but conflicting judgments within the committee, on the one hand, and where there is agreement that a high level of uncertainty clouds judgment, on the other. This contrasts with the conventional association of diversity of MPC opinion with uncertainty (both as cause and effect).

Keywords: uncertainty; judgement; ambiguity; central bank communication; monetary policy (search for similar items in EconPapers)
JEL-codes: B41 B50 E58 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-01
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
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