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On the Optimality of Decisions made by Hub-and-Spokes Monetary Policy Committees

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  • Jan Marc Berk
  • Beata K. Bierut

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 two subgroups, as is the case in hub-and-spokes systems of central banks (e.g. the Fed or the ESCB), can eliminate this inefficiency whilst retaining the simple majority voting rule.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 027.

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Date of creation: Feb 2005
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Handle: RePEc:dnb:dnbwpp:027

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Cited by:
  1. Paolo Balduzzi & Clara Graziano & Annalisa Luporini, 2011. "Voting in Small Committees," Working Papers - Economics wp2011_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  2. Jan Marc Berk & Beata K. Bierut, 2005. "Communication in Monetary Policy Committees," DNB Working Papers 059, Netherlands Central Bank, Research Department.

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