What's in a second opinion? Shadowing the ECB and the Bank of England

- ECB and Bank of England are shadowed by professional and academic economists.
- Provision of policy rate recommendation in advance of central bank decision
- Analysis of differences between recommendations and actual committee decisions
- Shadow Governing Council is less inflation averse than the ECB.
- Shadow Monetary Policy Committee is more hawkish than the Bank of England.

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.