What's in a second opinion? Shadowing the ECB and the Bank of England |
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| Institution: | 1. RWTH Aachen University, School of Business and Economics, Templergraben 64, 52062 Aachen, Germany;2. Philipps-University Marburg, Germany;3. Wilfrid Laurier University, Department of Economics, 75 University Ave., Waterloo, ON, Canada;4. Viessmann European Research Centre, Canada;1. University of the Basque Country, School of Economics, Av. Lehendakari Aguirre 83, 48015 Bilbao, Spain;2. University of Heidelberg, Department of Economics, Bergheimer Str. 58, 69115 Heidelberg, Germany;1. Department of Economics, Hanken School of Economics, PO Box 479, Fi-00101 Helsinki, Finland;2. SITE, Stockholm School of Economics, Stockholm, Sweden;3. Ifo Institute, Poschingerstr. 5, 81679 Munich, Germany;4. Department of Economics, University of Munich, Munich, Germany;5. CESifo, Germany;6. IZA, Germany |
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| Abstract: | One way of evaluating how well monetary authorities perform is to provide the public with a regular and independent second opinion. The European Central Bank (ECB) and the Bank of England (BoE) are shadowed by professional and academic economists who provide a separate policy rate recommendation in advance of the central bank announcement. In this paper, we systematically evaluate this second opinion and find that, first, the shadow committee of the ECB tends to be relatively less inflation averse than the ECB. In contrast, the shadow committee of the BoE proposes a more hawkish monetary policy stance than the BoE. Second, consensus within a shadow committee is far easier to reach when there is no pressure to change the policy rate. Third, the ECB's shadow committee is more activist than the ECB's Governing Council and a larger degree of consensus within the former brings about a greater likelihood that the two committees will agree. |
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