Skip to main content

CEP discussion paper

First Impressions Matter: Signalling as a Source of Policy Dynamics


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.


Stephen Hansen and Michael McMahon

12 September 2011     Paper Number CEPDP1074

Download PDF - First Impressions Matter: Signalling as a Source of Policy Dynamics

This CEP discussion paper is published under the centre's programme.