On the Optimality of Decisions

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On the Optimality of Decisions

Author Info

Jan Marc Berk () (De Nederlandsche Bank)
Beata Bierut () (Faculty of Economics, Erasmus Universiteit Rotterdam)

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Jan Marc Berk

Abstract

Most monetary policy committees decide on interest rates using a simple majority voting rule. Given the inherent heterogeneity of committee members, this voting rule is suboptimal in terms of the quality of the interest rate decision, but popular for other (political) reasons. We show that a clustering of committee members into 2 subgroups, as is the case in a hub-and spokes systems of central banks such as the Fed or the ESCB, can eliminate this suboptimality whilst retaining the majority voting rule.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-120/2.

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Date of creation: 09 Nov 2004
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Handle: RePEc:dgr:uvatin:20040120

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Related research
Keywords: D71; D78; E58;

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This paper has been announced in the following NEP Reports:

NEP-ALL-2004-11-22 (All new papers)
NEP-CDM-2004-11-22 (Collective Decision-Making)

References listed on IDEAS
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Other versions:
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(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.)

Jan Marc Berk & Beata K. Bierut, 2005. "Communication in Monetary Policy Committees," DNB Working Papers 059, Netherlands Central Bank, Research Department. [Downloadable!]

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