Sunday, 23 October 2011: 11:15 AM
The literature on the behavior of the Bank of England's Monetary Policy Committee (MPC) has focused on static voting patterns. We find statistical support for a dynamic pattern using a panel reaction function to analyze MPC votes over the 1997-2008 period. We find that internal and external members only behave differently in the final year of the term of externals. In that third year of tenure, internal members prefer higher policy rates. The MPC could benefit more from external thinking and expertise by increasing the term of external members and/or more frequent reappointments of externals.