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Too Many Cooks? Committees in Monetary Policy

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  • Helge Berger

    ()
    (*Free University Berlin, Department of Economics, Boltzmannstrasse 20, 14195 Berlin, Germany)

  • Volker Nitsc

    ()
    (Darmstadt University of Technology, Department of Law and Economics, Marktplatz 15, 64283 Darmstadt, Germany)

Abstract

How many people should decide monetary policy? In this article, we take an empirical perspective on this issue and analyze the relationship between the number of monetary policy decision makers and monetary policy outcomes. Using a new data set that characterizes central bank monetary policy committees (MPCs) in more than 30 countries from 1960 through 2006, we find a U-shaped relationship between MPC size and inflation; our results suggest that the lowest level of inflation is reached at MPCs with an intermediate size of about five to nine members. Similar results are obtained for inflation variability. Other MPC characteristics also matter for monetary policy outcomes, though to a smaller degree. For instance, the membership composition of the MPC as well as the frequency of MPC membership turnover appears to affect economic variables.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 78 (2011)
Issue (Month): 2 (October)
Pages: 452-475

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Handle: RePEc:sej:ancoec:v:78:2:y:2011:p:452-475

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  1. RIBONI, Alessandro & RUGE-MURCIA, Francisco, 2006. "The Dynamic (In)efficiency of Monetary Policy by Committee," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 2006-02, Universite de Montreal, Departement de sciences economiques.
  2. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, Elsevier, vol. 24(4), pages 817-832, December.
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Citations

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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. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, Elsevier, vol. 24(4), pages 817-832, December.
  3. Badinger, Harald & Nitsch, Volker, 2014. "National representation in supranational institutions: The case of the European Central Bank," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 19-33.
  4. Esteban Colla De Robertis & Last: Colla De Robertis, 2010. "Monetary Committee Size and Special Interest Influence," Documentos de Investigación - Research Papers, Centro de Estudios Monetarios Latinoamericanos, CEMLA 2, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
  5. Daniel Seidmann, 2011. "A theory of voting patterns and performance in private and public committees," Social Choice and Welfare, Springer, Springer, vol. 36(1), pages 49-74, January.
  6. Carsten Hefeker & Blandine Zimmer, 2014. "Optimal Conservatism and Collective Monetary Policymaking under Uncertainty," CESifo Working Paper Series 4933, CESifo Group Munich.
  7. Helge Berger & Tonny Lybek & Volker Nitsch, 2006. "Central Bank Boards Around the World," IMF Working Papers 06/281, International Monetary Fund.
  8. Harald Badinger & Volker Nitsch, 2011. "National Representation in Multinational Institutions: The Case of the European Central Bank," CESifo Working Paper Series 3573, CESifo Group Munich.
  9. Etienne Farvaque & Hakim Hammadou & Piotr Stanek, 2011. "Selecting Your Inflation Targeters: Background and Performance of Monetary Policy Committee Members," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 12(2), pages 223-238, 05.

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