Policymakers’ Interest Rate Preferences: Recent Evidence for Three Monetary Policy Committees
by Alexander Jung
European Central Bank
This paper estimates (pooled) Taylor-type rules based on
real-time information for three monetary policy committees:
the FOMC, the Bank of England’s MPC, and the Riksbank’s
Executive Board. Tests for heterogeneity among committee
members provide new empirical evidence on the distribution
of policymakers’ interest rate preferences and their individual
reaction patterns to economic shocks. For all three committees
we find preference heterogeneity to be systematic over the last
decade. Policymakers’ preference distributions are found to be
consistent with an underlying symmetric normal distribution.
Disagreements among members mainly relate to their shortrun
response to shocks. Additional cluster analyses exploiting
individual response parameters to shocks from the reaction
functions show that the membership status (chairman, internal
member, external member) explains some of the heterogeneity
in members’ preferences and responses.
JEL Codes: C23, D72, D83, E58.
Full article (PDF, 48 pages 1346 kb)