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

40 Pages Posted: 1 May 2013

See all articles by Stephen Hansen

Stephen Hansen

University of Oxford - Department of Economics

Michael F. McMahon

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

Carlos Rivera

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: April 30, 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: E520, E580, D780

Suggested Citation

Hansen, Stephen and McMahon, Michael F. and Rivera, Carlos, How Experts Decide: Preferences or Private Assessments on a Monetary Policy Committee? (April 30, 2013). CESifo Working Paper Series No. 4201, Available at SSRN: https://ssrn.com/abstract=2258347 or http://dx.doi.org/10.2139/ssrn.2258347

Stephen Hansen (Contact Author)

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, Oxfordshire OX1 3UQ
United Kingdom

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

Carlos Rivera

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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