Hansen, Stephen and McMahon, Michael F. (2016) First impressions matter : signalling as a source of policy dynamics. The Review of Economic Studies, 83 (4). pp. 1645-1672. doi:10.1093/restud/rdw007 ISSN 0034-6527.

PDF WRAP_m_mcmahon_dynamic2015.pdf - Accepted Version - Requires a PDF viewer. Download (766Kb)

Request Changes to record.

Abstract

We provide the first direct empirical support for the importance of signalling in monetary policy by testing two key predictions from a novel structural model. First, all policymaker types should become less tough on inflation over time and secondly, types that weigh output more should have a more pronounced shift. Voting data from the Bank of England's Monetary Policy Committee strongly support both predictions. Counterfactual results indicate signalling has a substantial impact on interest rates over the business cycle, and improves the committee designer's welfare. Implications for committee design include allowing regular member turnover and transparency regarding publishing individual votes.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Bank of England. Monetary Policy Committee, Monetary policy -- Great Britain -- 21st Century
Journal or Publication Title:	The Review of Economic Studies
Publisher:	Oxford University Press
ISSN:	0034-6527
Official Date:	15 February 2016
Dates:	Date Event 15 February 2016 Published 1 September 2015 Accepted
Volume:	83
Number:	4
Page Range:	pp. 1645-1672
DOI:	10.1093/restud/rdw007
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Date of first compliant deposit:	31 January 2017
Date of first compliant Open Access:	15 February 2018

Request changes or add full text files to a record

Repository staff actions (login required)

View Item

Downloads