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The discursive dilemma in monetary policy

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  • Carl Andreas Claussen

    ()
    (Sveriges Riksbank)

  • Øistein Røisland

    ()
    (Norges Bank (Central Bank of Norway))

Abstract

The discursive dilemma implies that the policy decision of a board of policymakers depends on whether the board reaches the decision by voting directly on policy (conclusion-based procedure), or by voting on the premises for the decision (premise-based procedure). We derive results showing when the discursive dilemma may occur, both in a general model and in a standard monetary policy model. When the board aggregates by majority voting, a discursive dilemma can occur if either (i) the relationship between the premise and the decision is non-monotonic, or (ii) if the board members have different judgments on at least two of the premises. Normatively, a premise-based procedure tends to give better decisions when there is disagreement on parameters of the model.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2010/05.

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Length: 32 pages
Date of creation: 20 Apr 2010
Date of revision:
Handle: RePEc:bno:worpap:2010_05

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Cited by:
  1. Maurin, Vincent & Vidal, Jean-Pierre, 2012. "Monetary policy deliberations: committee size and voting rules," Working Paper Series 1434, European Central Bank.
  2. Lars E. O. Svensson, 2011. "Practical Monetary Policy: Examples from Sweden and the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 289-352.

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