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Central Banking by Committee

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  • Sibert, Anne

Abstract

There is a small, but growing, economics literature on the importance and effects of having monetary policy made by a committee, rather than by an individual. Complimenting this is an older and larger body of literature on groups in the other social sciences, particular in social psychology. This paper provides a review of some of this work, focussing on two important features of committees: the effect of their size on performance and whether or not they are more moderate than the members who make them up. The results of the literature on committee size and committee polarization suggest that the ideal monetary policy committee may not have many more than five members. It should have a well-defined objective and it should publish the votes of its members. It should be structured so that members do not act as part of a group, perhaps by having short terms in office and members from outside the central bank. External scrutiny of the decision-making process should be encouraged.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5626.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5626

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Keywords: committee size; groupthink; social loafing;

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References

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  10. Gerlach-Kristen, Petra, 2005. "Too little, too late: Interest rate setting and the costs of consensus," Economics Letters, Elsevier, vol. 88(3), pages 376-381, September.
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  1. Governance of bank supervision is central to its success
    by ? in Bruegel blog on 2012-08-31 10:06:28
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