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Communication in a monetary policy committee

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  • Berk, Jan Marc
  • Bierut, Beata K.
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    Abstract

    We model monetary policy decisions as being taken by a group of heterogeneous policy makers, organized in a committee. Intuitively, when MPC members disclose and discuss the arguments behind their view on the interest rate, the quality of the collective decision should be higher compared to merely taking a simultaneous vote. We show that in some cases this intuition need not be correct. We also find that communication is a relatively effective way to implement the ‘knowledge pooling’ argument in favor of collective decision-making, compared to expanding the size of a committee. Moreover, decision-making with internal communication appears generally more robust in situations when heterogeneity of members is not adequately captured by decision-making rules.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Political Economy.

    Volume (Year): 27 (2011)
    Issue (Month): 4 ()
    Pages: 791-801

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    Handle: RePEc:eee:poleco:v:27:y:2011:i:4:p:791-801

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    Web page: http://www.elsevier.com/locate/inca/505544

    Related research

    Keywords: Committees; Deliberations; Correlated votes; Simple majority voting;

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    References

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    1. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central Bank boards around the world: why does membership size differ?," Discussion Papers 2008/5, Free University Berlin, School of Business & Economics.
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    5. Berk, Jan Marc & Bierut, Beata K., 2009. "Monetary Policy Committees: meetings and outcomes," Working Paper Series 1070, European Central Bank.
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    Cited by:
    1. Niklas Potrafke, 2013. "Minority positions in theGerman Council of Economic Experts: A political economic analysis," Ifo Working Paper Series Ifo Working Paper No. 160, Ifo Institute for Economic Research at the University of Munich.
    2. Jung, Alexander & Kiss, Gergely, 2012. "Preference heterogeneity in the CEE inflation-targeting countries," European Journal of Political Economy, Elsevier, vol. 28(4), pages 445-460.
    3. Maurin, Vincent & Vidal, Jean-Pierre, 2012. "Monetary policy deliberations: committee size and voting rules," Working Paper Series 1434, European Central Bank.
    4. Florin Cornel DUMITER & Horatiu Florin SOIM, 2012. "Bank of England’s monetary policy committee – assessing the importance and the implication upon monetary policy," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 61-67, May.
    5. Demiralp, Selva & Kara, Hakan & Özlü, Pınar, 2012. "Monetary policy communication in Turkey," European Journal of Political Economy, Elsevier, vol. 28(4), pages 540-556.

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