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 individualisticmajority voting commitee, such as the Bank of England’sMPC, has important benefits. It is argued that such a monetary policycommittee can take personalities out of monetary policy decisions,while at the same time offering the opportunity to consider and debatea range of possible policy responses. Critical to understanding theseclaims would be an assessment of heterogeneity among members ofthe committee and how differences are resolved through the decisionmaking process. In this paper, we propose a two-stage model of themonetary policy decision making process. Within the context of thismodel, we consider interval censored responses of individual committeemembers when there is both heterogeneity and interaction amongmembers. Our empirical results point to heterogeneity in policy responsesarising from several different sources, as well as interactionsbetween committee members