How Experts Decide: Preferences or Private Assessments on a Monetary Policy Committee?

CAMA Working Paper 18/2013

41 Pages Posted: 15 Apr 2013

See all articles by Stephen Hansen

Stephen Hansen

University of Oxford - Department of Economics

Carlos Rivera

Princeton University

Michael F. McMahon

University of Warwick - Faculty of Social Studies; London School of Economics & Political Science (LSE)

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Date Written: February 19, 2013

Abstract

Using voting data from the Bank of England, we show that different individual assessments of the economy strongly influence votes after controlling for individual policy preferences. We estimate that internal members form more precise assessments than externals and are also more hawkish, though preference differences are very small if members vote strategically. Counterfactual analysis shows that committees add value through aggregating private assessments, but that gains to larger committees taper off quickly beyond five members. There is no evidence that externals add value through preference moderation. Since their assessments also have lower precision, mixed committees may not be optimal.

Keywords: Committees, Monetary Policy

JEL Classification: E52, E58, D78

Suggested Citation

Hansen, Stephen and Rivera, Carlos and McMahon, Michael F., How Experts Decide: Preferences or Private Assessments on a Monetary Policy Committee? (February 19, 2013). CAMA Working Paper 18/2013, Available at SSRN: https://ssrn.com/abstract=2248446

Stephen Hansen (Contact Author)

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, Oxfordshire OX1 3UQ
United Kingdom

Carlos Rivera

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Michael F. McMahon

University of Warwick - Faculty of Social Studies ( email )

United Kingdom

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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