Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England's MPC

Arnab Bhattacharjee, Sean Holly

    Research output: Contribution to conferencePaper

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    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 internally generated forecasts of output and market generated expectations of medium term inflation provide the best description of discrete changes in interest rates. We also find a role for asset prices through the equity market, foreign exchange market and housing prices. There are also identifiable forms of heterogeneity among members of the committee that improves the predictability of interest rate changes. This can be thought of as supporting the argument that full transparency of monetary policy decision making can be welfare enhancing.

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    Original languageEnglish
    Number of pages25
    Publication statusPublished - 2004
    EventMoney Macro and Finance (MMF) Research Group 36th Annual Conference 2004 - London, United Kingdom
    Duration: 6 Sep 20048 Sep 2004

    Conference

    ConferenceMoney Macro and Finance (MMF) Research Group 36th Annual Conference 2004
    CountryUnited Kingdom
    CityLondon
    Period6/09/048/09/04

    Keywords

    • Monetary policy
    • Interest rates
    • Monetary Policy Committee
    • Commitee decision making

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