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Monetary policy committee size and inflation volatility

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  • Szilard Erhart
  • Harmen Lehment
  • Jose Vasquez Paz

Abstract

Previous research on the optimal size of a monetary policy committee (MPC) focused on theoretical analyses and experimental studies. These studies suggest that the ideal monetary policy committee may not have many more than five members. In this paper we conduct an empirical cross-country study to explore whether there is a link between the size of an MPC and inflation volatility. The analysis for 75 countries which have adopted MPCs provides some support for the above suggestion: countries with less than five MPC members tend to have larger deviations from trend inflation than MPCs with five members; raising the number of MPC members above five does not contribute to a further reduction in volatility.
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Suggested Citation

  • Szilard Erhart & Harmen Lehment & Jose Vasquez Paz, 2010. "Monetary policy committee size and inflation volatility," International Economics and Economic Policy, Springer, vol. 7(4), pages 411-421, December.
    • Handle: RePEc:kap:iecepo:v:7:y:2010:i:4:p:411-421
    DOI: 10.1007/s10368-010-0148-x
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    Cited by:

    1. Helge Berger & Volker Nitsch, 2011. "Too Many Cooks? Committees in Monetary Policy," Southern Economic Journal, John Wiley & Sons, vol. 78(2), pages 452-475, October.
    2. Charléty, Patricia & Romelli, Davide & Santacreu-Vasut, Estefania, 2017. "Appointments to central bank boards: Does gender matter?," Economics Letters, Elsevier, vol. 155(C), pages 59-61.
    3. Ekor, Maxwell & Saka, Jimoh & Adeniyi, Oluwatosin, 2014. "Monetary Policy Committee and Monetary Policy Conduct in Nigeria: A Preliminary Investigation," MPRA Paper 60770, University Library of Munich, Germany, revised 2014.
    4. Szilárd Erhart & Jose Luis Vasquez-Paz, 2008. "Determinants of the size of a monetary policy committee: Theory and cross country evidence," Working Papers 2008-001, Banco Central de Reserva del Perú.
    5. Christoph S. Weber, 2018. "Central bank transparency and inflation (volatility) – new evidence," International Economics and Economic Policy, Springer, vol. 15(1), pages 21-67, January.
    6. Esteban Colla De Robertis, 2010. "Monetary Committee Size and Special Interest Influence," Documentos de Investigación - Research Papers 2, CEMLA.

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    More about this item

    Keywords

    Monetary policy committee; Inflation volatility; E31; E42; E58;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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