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... assumption that signals are serially uncorrelated. 3.3 How members vote given their preferences and beliefs There are two assumptions the voting literature makes about voting behavior in committees (=-=Austen-Smith and Banks, 1996-=-). First, when members vote sincerely they behave as if they get utility from matching their vote to the state. Under this assumption member i’s expected utility from vit = 1 is −(1−θi) Pr [ωt = 0 | s...

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...e existing literature. First, there is a growing literature on all aspects of the use of committees to make monetary policy decisions: this includes important summaries of the state of the knowledge (=-=Gerling et al., 2005-=-; Blinder, 2007), issues of agenda-setting (Riboni and RugeMurcia, 2010), reputation-building on monetary policy committees (Sibert, 2003; Hansen and McMahon, 2013), credibility of committees (Mihov a...

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... First, there is a growing literature on all aspects of the use of committees to make monetary policy decisions: this includes important summaries of the state of the knowledge (Gerling et al., 2005; =-=Blinder, 2007-=-), issues of agenda-setting (Riboni and RugeMurcia, 2010), reputation-building on monetary policy committees (Sibert, 2003; Hansen and McMahon, 2013), credibility of committees (Mihov and Sibert, 2006...

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... matter, though, larger committees also entail additional coordination and infrastructure costs. Some authors have also argued that increasing the number of members makes deliberation more difficult (=-=Furnham, 1997-=-), and increases the costs of free-riding in terms of information acquisition (Sibert, 2006). So, the marginal benefit of an additional member is also important to know. While we measure it to be posi...

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...in Washington DC. One argument in favor of Presidents having more expertise is that each has a reasonably large staff and budget which might encourage competition in the market for economic analysis (=-=Goodfriend, 1999-=-). The Fed Governors, by comparison, have to rely mostly on the analysis of the Board of Governors’ staff, which is shared amongst FOMC members. At the Bank of England, it is the externals who only ha...

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...on making only marginally if expertise is sufficiently high. Given the potentially large costs from adding more and more members, such as information exchange problems and free-riding by members (see =-=Sibert, 2006-=-, for a discussion), a smaller committee is likely to be better. The second design issue explored is whether, as argued by Blinder (2007), external members can add value through moderating internals’ ...

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...ample, the UK, Poland, and Hungary) make use of externals, presumably to take advantage of diversity, while others (for example, the USA and Sweden) do not. In line with the existing literature (e.g. =-=Gerlach-Kristen, 2003-=-, and references below), internals’ estimated preferences are significantly more hawkish, but our novel finding is that they have higher estimated expertise. This finding implies that the justificatio...

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...nalysis because there is a one-person, one-vote philosophy: the Bank encourages members to simply determine the rate of interest that they feel is most likely to achieve the inflation target (Bank of =-=England, 2010-=-) and majority vote determines the outcome. As such, the observed votes should reflect members’ genuine policy preferences. Consistent with this philosophy, the MPC displays substantial dissent: 64% o...

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...ll likelihood. To obtain estimates of θi and σi, we follow the two-step estimation approach of Iaryczower and Shum (2012) and the literature that estimates games more broadly (see the papers cited in =-=Pesendorder and Takahashi, 2013-=-). The general idea is to estimate choice—in this case vote—probabilities in a first stage with flexible functional forms that depend on observed covariates. These first-stage coefficient estimates ar...

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...nted as an external member and had no prior experience in the Bank before her appointment. 4 processing ability, of the sort emphasized in the limited attention literature (discussed, for example, in =-=Sims, 2010-=-), leads each member to come to a different view. 3.1 Member preferences In each period t the committee implements a decision dt ∈ {0, 1}, where 0 represents the lower of two possible rate changes and...