First impressions matter: signalling as a source of policy dynamics

Hansen, Stephen and Mcmahon, Michael (2011) First impressions matter: signalling as a source of policy dynamics. CEP Discussion Papers (CEPDP1074). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We first establish that policymakers on the Bank of England's Monetary Policy Committee choose lower interest rates with experience. We then reject increasing confidence in private information or learning about the structure of the macroeconomy as explanations for this shift. Instead, a model in which voters signal their hawkishness to observers better fits the data. The motivation for signalling is consistent with wanting to control inflation expectations, but not career concerns or pleasing colleagues. There is also no evidence of capture by industry. The paper suggests that policy-motivated reputation building may be important for explaining dynamics in experts’ policy choices.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2011 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy-Making and Implementation E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
Date Deposited:	22 Feb 2024 16:06
Last Modified:	22 Feb 2024 16:06
URI:	http://eprints.lse.ac.uk/id/eprint/121736

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