Taking Personalities out of Monetary Policy Decision Making? Interactions, Heterogeneity and Committee Decision-making in the Bank of England’s MPC

It is widely believed that setting monetary policy through an individualistic
majority voting commitee, such as the Bank of England’s
MPC, has important benefits. It is argued that such a monetary policy
committee can take personalities out of monetary policy decisions,
while at the same time offering the opportunity to consider and debate
a range of possible policy responses. Critical to understanding these
claims would be an assessment of heterogeneity among members of
the committee and how differences are resolved through the decision
making process. In this paper, we propose a two-stage model of the
monetary policy decision making process. Within the context of this
model, we consider interval censored responses of individual committee
members when there is both heterogeneity and interaction among
members. Our empirical results point to heterogeneity in policy responses
arising from several different sources, as well as interactions
between committee members.