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Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve

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Author Info
Ellen E. Meade
David Stasavage

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Abstract

When central banks are transparent about their decision making, there may be clear benefits in terms ofcredibility, policy effectiveness, and improved democratic accountability. While recent literature has focusedon all of these advantages of transparency, in this paper we consider one potential cost: the possibility thatpublishing detailed records of deliberations will make members of a monetary policy committee more reluctantto offer dissenting opinions. Drawing on the recent literature on expert advisors with ¿career concerns¿, weconstruct a model that compares incentives for members of a monetary policy committee to voice dissent whendeliberations occur in public, and when they occur in private. We then test the implications of the model usingan original dataset based on deliberations of the Federal Reserve¿s Federal Open Market Committee, askingwhether the FOMC¿s decision in 1993 to begin releasing full transcripts of its meetings has altered incentivesfor participants to voice dissenting opinions. We find this to be the case with regard to both opinions on shortterminterest rates and on the ¿bias¿ for future policy.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0608.

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Date of creation: Jan 2004
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Handle: RePEc:cep:cepdps:dp0608

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Related research
Keywords: transparency; central banking; career concerns;

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Find related papers by JEL classification:
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
E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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References listed on IDEAS
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  1. Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, June. [Downloadable!] (restricted)
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  4. Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA. [Downloadable!]
    Other versions:
  6. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January. [Downloadable!] (restricted)
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  7. Daniel Thornton & David C. Wheelock, 2000. "A history of the asymmetric policy directive," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 1-16. [Downloadable!]
  8. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2003. "Does monetary policy transparency reduce disinflation costs?," Manchester School, University of Manchester, vol. 71(5), pages 521-540, 09. [Downloadable!] (restricted)
  9. Donald L. Kohn & Brian P. Sack, 2003. "Central bank talk: does it matter and why?," Finance and Economics Discussion Series 2003-55, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Manchester School, University of Manchester, vol. 71(5), pages 478-497, 09. [Downloadable!] (restricted)
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  12. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christopher W. Crowe & Ellen E. Meade, 2008. "Central Bank Independence and Transparency: Evolution and Effectiveness," IMF Working Papers 08/119, International Monetary Fund. [Downloadable!]
    Other versions:
  2. José De Gregorio, 2008. "Transparency and Communications in Modern Central Banking," Economic Policy Papers Central Bank of Chile 25, Central Bank of Chile. [Downloadable!]
  3. Arnab Bhattacharjee & Sean Holly, 2006. " Taking Personalities out of Monetary Policy Decision Making? Interactions, Heterogeneity and Committee Decisions in the Bank of England’s MPC," CDMA Working Paper Series 0612, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
  4. Geraats, P.M, 2005. "Transparency of Monetary Policy: Theory and Practice," Cambridge Working Papers in Economics 0549, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  5. Stephen Hansen & Michael F. McMahon, 2008. "Delayed Doves: MPC Voting Behaviour of Externals," CEP Discussion Papers dp0862, Centre for Economic Performance, LSE. [Downloadable!]
  6. Otto H. Swank & Bauke Visser, 2007. "Is Transparency to no avail? Committee Decision-making, Pre-meetings, and Credible Deals," Tinbergen Institute Discussion Papers 07-055/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  7. Geraats, Petra M. & Eijffinger, Sylvester C.W. & Cruijsen, Carin A.B. van der, 2006. "Does central bank transparancy reduce interes rates?," Discussion Paper 11, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  8. Harris, Mark & Spencer, Christopher, 2008. "Decade of dissent: explaining the dissent voting behavior of Bank of England MPC members," MPRA Paper 9100, University Library of Munich, Germany. [Downloadable!]
  9. Eijffinger, Sylvester C W & van der Cruijsen, Carin A B, 2007. "The Economic Impact of Central Bank Transparency: A Survey," CEPR Discussion Papers 6070, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Bhattacharjee, A. & Holly, S., 2005. "Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England’s MPC," Cambridge Working Papers in Economics 0530, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  11. Ellen Meade, 2006. "Dissent and Disagreement on the Fed's FOMC: Understanding Regional Affiliations and limits to Transparency," DNB Working Papers 094, Netherlands Central Bank, Research Department. [Downloadable!]
  12. Job Swank & Otto Swank & Bauke Visser, 2006. "Transparency and Pre-meetings," Tinbergen Institute Discussion Papers 06-051/1, Tinbergen Institute. [Downloadable!]
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