inconsistent voting behaviour in the fomc this article uses transcript data to examine determinants of inconsistent voting behaviour in the federal open market committee fomc in the period 1989 2008 inconsistent voting behaviour occurs

insiders versus outsiders in monetary policymaking this paper looks at the voting patterns of internal and external members of the mpc to investigate how far there are differences between insiders and outsiders we make three contributions first we assess the extent to which the bank of england internally generated forecasts explain the mpc members voting decisions this is important as generating forecasts on a quarterly basis is a key part of the process used by the bank of england the forecast for inflation is made public in the inflation report while the output gap forecast is not second we use a random coefficient method of estimation in which the parameters of the interest rate rule are allowed but not required to be different across members third we find evidence of some heterogeneity in the intercept a measure of experience on the mpc and the interest rate smoothing parameter but no significant differences in the members reaction to the forecasts of inflation and the output gap this abstract was borrowed from another version of this item

regulating stock externalities under uncertainty abstract using a simple analytical model incorporating benefits of a stock costs of adjusting the stock and uncertainty in costs we uncover several important principles governing the choice of price based policies e g taxes relative to quantity based policies e g tradable permits for controlling stock externalities as in weitzman rev econom stud 41 4 1974 477 the relative slopes of the marginal benefits and costs of controlling the externality continue to be critical determinants of the efficiency of prices relative to quantities with flatter marginal benefits and steeper marginal costs favoring prices but some important adjustments for dynamic effects are necessary including correlation of cost shocks across time discounting stock decay and the rate of benefits growth applied to the problem of greenhouse gases and climate change we find that a price based instrument generates several times the expected net benefits of a quantity instrument

power sharing in monetary policy committees evidence from the united kingdom and sweden committees may make better monetary policy decisions than individuals however the benefits of group decision making could be lost if committee members cede power to a chairman we develop an econometric model to describe intracommittee power sharing across members estimation of the model permits us to classify monetary policy committees into the typology developed by blinder 2004 2007 we estimate our model for the united kingdom s bank of england boe and sweden s riksbank results for the boe suggest that the governor has little influence over other committee members while those for the riksbank indicate that the governor is highly influential

forecast dispersion dissenting votes and monetary policy preferences of fomc members the role of individual career characteristics and political aspects using data from 1992 to 2001 we study the impact of members economic forecasts on the probability of casting dissenting votes in the federal open market committee fomc employing standard ordered probit techniques we find that higher individual inflation and real gdp growth forecasts relative to the committee s median significantly increase the probability of dissenting in favor of tighter monetary policy whereas higher individual unemployment rate forecasts significantly decrease it using interaction models we find that fomc members with longer careers in government industry academia non governmental organizations ngos or on the staff of the board of governors are more focused on output stabilization while fomc members with longer careers in the financial sector or on the staffs of regional federal reserve banks are more focused on inflation stabilization we also find evidence that politics matters with republican appointees being much more focused on inflation stabilization than democratic appointees moreover during the entire clinton administration natural monetary policy preferences of bank presidents and board members for inflation and output stabilization were more pronounced than under periods covering the administrations of both george h w bush and george w bush respectively

are monetary policy reaction functions asymmetric the role of nonlinearity in the phillips curve abstract this paper investigates the implications of a nonlinear phillips curve for the derivation of optimal monetary policy rules combined with a quadratic loss function the optimal policy is also nonlinear with the policy maker increasing interest rates by a larger amount when inflation or output are above target than the amount it will reduce them when they are below target specifically the main prediction of our model is that such a source of nonlinearity leads to the inclusion of the interaction between expected inflation and the output gap in an otherwise linear taylor rule we find empirical support for this type of asymmetries in the interest rate setting behaviour of four european central banks but none for the us fed

the dissent voting behaviour of central bankers what do we really know we examine the determinants of the dissent in central bank boards voting records about monetary policy rates in the czech republic hungary sweden the uk and the us in contrast to previous studies we consider 25 different macroeconomic financial institutional psychological or preference related factors jointly and use bayesian model averaging bma to formally assess the attendant model uncertainty we find that the rate of dissent is between 5 and 20 for the examined central banks our results suggest that most of the examined regressors including factors that capture the effects of inflation and output are not robust determinants of voting dissent this result suggests that unobserved characteristics of central bankers and different communication strategies drive the dissent rather than the level of macroeconomic uncertainty

a decade of dissent explaining the dissent voting behavior of bank of england mpc members we examine the dissent voting record of the bank of england monetary policy committee contrary to findings in the fomc literature for example havrilesky and schweitzer in the political economy of american monetary policy pp 197 210 1990 chappell et al in q j econ 108 1 185 218 1993 the effects of members career backgrounds and the political channel of appointment on voting behavior are negligible reflecting the distinct institutional constraints and incentives associated with uk monetary policy our findings also suggest that literature which characterizes voting behavior as being predominantly determined by members internal or external status is overly simplistic this view is supported by econometric results appertaining to the introduction of member specific fixed effects which account for possible unobserved heterogeneity

pounds that kill the external costs of vehicle weight heavier vehicles are safer for their own occupants but more hazardous for other vehicles simple theory thus suggests that an unregulated vehicle fleet is inefficiently heavy using three separate identification strategies we show that controlling for own vehicle weight being hit by a vehicle that is 1000 pounds heavier generates a 40 50 increase in fatality risk these results imply a total accident related externality that exceeds the estimated social cost of us carbon emissions and is equivalent to a gas tax of 0 97 per gallon 136 billion annually we consider two policies for internalizing this external cost a weight varying mileage tax and a gas tax and find that they are similar for most vehicles the findings suggest that european gas taxes may be much closer to optimal levels than the us gas tax language en

the policy choices and reaction functions of bank of england mpc members the results of an econometric exercise are presented showing that monetary policy committee mpc members appointed from outside the ranks of bank of england staff outsiders react differently to forecasts of inflation and output than those appointed from within the bank insiders all results are reinforced by the well established findings that compared with outsiders insiders choose higher interest rates are more likely to vote as a bloc and feature on the winning side of policy decisions more frequently on the basis of these results it is argued that the current mpc framework is biased toward the policy choices of insiders

inflated ordered outcomes we extend harris and zhao 2007 by proposing a panel inflated ordered probit model and demonstrate its usefulness by applying it to bank of england monetary policy committee voting data

gasoline prices fuel economy and the energy paradox abstract policymakers often assert that consumers undervalue future gasoline costs when they buy automobiles we test this by measuring whether relative prices of vehicles with different fuel economy ratings fully adjust to variation in gasoline prices vehicle prices move as if consumers are indifferent between 1 00 in discounted future gas cost and 0 76 in vehicle purchase price we show how corrections for endogenous market shares and utilization measurement error and different gasoline price forecasts affect the results we also provide unique evidence of sticky information vehicle markets respond to changes in gasoline prices with up to a six month delay

incomplete insurance and absolute risk aversion abstract suppose that a subset of states of nature are not verifiable individually given an optimal feasible insurance scheme the expected utility across a group of unverifiable states is greater less than that of a verifiable state if the degree of absolute risk aversion is decreasing increasing

do consumers recognize the value of fuel economy evidence from used car prices and gasoline price fluctuations abstract debate about the appropriate design of energy policy hinges critically on whether consumers might undervalue energy efficiency due to myopia or some other manifestation of limited rationality we contribute to this debate by measuring consumers willingness to pay for fuel economy using a novel identification strategy and high quality microdata from wholesale used car auctions we leverage differences in future fuel costs across otherwise identical vehicles that have different current mileage and therefore different remaining lifetimes by seeing how price differences across high and low mileage vehicles of different fuel economies change in response to shocks to the price of gasoline we estimate the relationship between vehicle prices and future fuel costs our data suggest that used automobile prices move one for one with changes in present discounted future fuel costs which implies that consumers fully value fuel economy

output and attribute based carbon regulation under uncertainty abstract output based carbon regulations such as fuel economy standards and the rate based standards in the clean power plan create well known incentives to inefficiently increase output similar distortions are created by attribute based regulations this paper demonstrates that despite these distortions output and attribute based standards can always yield strictly greater expected welfare than flat emission standards given uncertainty in demand for output or attributes assuming locally constant marginal damages for fuel economy standards the welfare maximizing amount of attribute or mileage basing is likely small relative to current policy for the electricity sector however an intensity standard may yield greater expected welfare than a flat standard

is the mpc s voting record informative about future uk monetary policy it is shown that the voting record of the monetary policy committee of the bank of england helps predict future policy rate changes this result is robust to the inclusion of market participants expectations as measured by the slope of the term structure of money market rates and interest rate futures moreover expectations seem to adjust to the information contained in the voting record which suggests that publishing the minutes of mpc meetings increases the transparency of monetary policy

gasoline price uncertainty and the design of fuel economy standards abstract what are the implications of gasoline price volatility for the design of fuel economy policies i show that this problem has a strong parallel to weitzman s 1974 classic model of using price or quantity controls to regulate an externality changes in fuel prices act as shocks to the marginal cost of complying with the standard assuming constant marginal damages from fuel consumption an application of weitzman 1974 implies that a fixed fuel economy standard reduces expected welfare relative to a price policy such as a feebate or equivalently a fuel economy standard that is indexed to the price of gasoline when the regulator is constrained to use a fixed standard i show that the usual approach to setting the standard equate expected marginal compliance cost to marginal damage is likely to be sub optimal because the standard may not bind if the realized gasoline price is sufficiently high instead the optimal fixed standard will be relatively relaxed and may be non binding even at the expected gasoline price finally i show that although an attribute based standard allows vehicle choices to flexibly respond to gasoline price shocks the resulting distortions imply that the optimal fuel economy standard is not attribute based

what do consumers believe about future gasoline prices a full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices we provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the michigan survey of consumers we find that average consumer beliefs are typically indistinguishable from a no change forecast justifying an assumption commonly made in the literature on consumer valuation of energy efficiency we also provide evidence on circumstances in which consumer forecasts are likely to deviate from no change and on significant cross consumer forecast heterogeneity

the role and operations of the bank of england monetary policy committee this paper describes the way in which the monetary policy committee mpc of the bank of england seeks to meet the tasks it has been given under the new arrangements for the conduct of monetary policy it starts with the definition of the tasks then describes the activities that lead up to the mpc s decisions and the publication of its inflation report

the immediate challenges for the european central bank immediate challenges for the ecb issues in formulating a single monetary policy this paper discusses a number of issues that the newly constituted board of the ecb will face early on conducting a european monetary policy will be very different from living under the protective umbrella of the bundesbank we discuss voting on the ecb board and argue that the ability to communicate with the public will be critical for the success of the new institution we also ask how a single monetary policy a common change in the interest rate controlled by the ecb is transmitted to the economy of each member country we show that the monetary process differs significantly inside emu initially at least the cost of a disinflation episode could fall disproportionately on a few member countries those with both a financial structure that spreads a monetary contraction widely and a wage price structure that is relatively inflexible this process moreover is sure to evolve in part as a result of financial industry restructuring already under way but in part accentuated by the common money furthermore as the lucas principle suggests the wage price process itself will adapt to the changing focus of european monetary policy rudi dornbusch carlo favero and francesco giavazzi

dynamic taxes and quotas with learning we compare dynamic taxes and quotas when a regulator and non strategic firm have asymmetric information the regulator learns by using either a tax or a quota that can be slack with a tax the information asymmetry is resolved in one period optimal learning using a quota is less transparent but we show that learning never takes place gradually in the first period the regulator either acts myopically or he tries to improve his information but he never experiments in subsequent periods we use this result to assess the informational advantage of taxes compared to quotas under asymmetric information

a note on environmental policy and innovation when governments cannot commit abstract it is widely accepted that one of the most important characteristics of an effective pollution control policy is to provide firms with credible incentives to make long run investments in r d that can drastically reduce pollution recognizing that a government may be tempted to revise its policy design after innovations become available this note shows how the performance of two policy instruments prices uniform taxes and quantities tradeable pollution permits differ in such a setting i also discuss the gains from combining either instrument with subsidies to adopting firms

automobile externalities and policies this paper discusses the nature and magnitude of externalities associated with automobile use including local and global pollution oil dependence traffic congestion and traffic accidents it then discusses current federal policies affecting these externalities including fuel taxes fuel economy and emissions standards and alternative fuel policies summarizing insofar as possible the welfare effects of those policies finally we discuss emerging pricing policies including congestion tolls and insurance reform and summarize the appropriate combination of policies to address automobile externalities

layoffs recruitment and interfirm mobility contract and search theories are integrated to provide a consistent explanation of contract formation the intertemporal structure of labor markets the absence of ex post market clearing and thus of unemployment in a contractual setting self fulfilling equilibria are described in which low productivity firms lay off some workers while high productivity firms recruitment search intensity and the resulting degree of interfirm mobility are endogenous the effects of severance pay on layoffs and mobility are identified finally the market economy is shown to generate too few layoffs whenever high productivity firms recruit new hires without recruitment laidoff workers are immobile and equilibrium is constrained efficient

the economics of attribute based regulation theory and evidence from fuel economy standards in many countries fuel economy standards mandate that vehicles meet a certain fuel economy but heavier or larger vehicles are allowed to meet a lower standard this has the perverse implication of allowing automakers to meet standards either by improving fuel economy or by increasing weight which lowers fuel economy and increases externalities related to accidents this is but one example of an attribute based regulation in which the regulation imposed on a product depends on both the externality it creates and some other attribute attribute basing potentially motivates rms and individuals to strategically alter the attribute thereby endogenously altering the stringency of the regulation this paper develops a theory of attribute basing to demonstrate the costs and benets of its use the paper then empirically examines the consequences of attribute based fuel economy standards in japan where fuel economy standards are a notched attribute based function of vehicle weight we use cross sectional and panel techniques to demonstrate that attribute based regulation has signicantly altered the distribution of vehicle weight in japan where 10 of vehicles bunch at weight notches for cars whose weight is altered in response to the policy we estimate that the alteration generates a welfare loss from the exacerbation of weight related externalities of 1 500 per unit sold which translates into a 700 million annual loss across the japanese auto market

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

appointment procedures and fomc voting behavior an important issue for the conduct of monetary policy in the united states is whether the various appointment procedures of members of the federal open market committee help determine their voting behavior it is usually asserted that the method by which district bank presidents are appointed leads to more independence and or more conservative behavior increased independence is generally believed to reduce suboptimal short run manipulation of monetary policy but at the cost of reducing the central bank s accountability to the country s short run and longrun objectives the social desirability of any potential differences in monetary policy resulting from these appointment procedures and the optimality of discretionary policy in general are not addressed in this paper however instead the effect on monetary policy of the different appointment procedures currently in place within the federal reserve system is examined does the increased independence that the district bank presidents supposedly possess produce significantly different monetary policy from that of the politically appointed board governors many studies have examined the effects various appointment procedures may have on voting at the fomc and the results have been somewhat mixed belden 2 chappell havrilesky and mcgregor 3 havrilesky and gildea 6 and puckett 8 find that bank presidents tend to vote for tighter policy than board governors while tootell 10 finds no differences between the two groups most of the literature has concluded that in some unclearly defined way and for no clear theoretical reason the more independent district presidents are more conservative than the board governors in this paper conservative is defined over several clear dimensions in order to test whether district presidents vote more conservatively than board governors some slight variation in the voting behavior of bank presidents and board governors is found but the causes of any dissimilarities are shown to be much different from those asserted in the earlier literature