Committees Versus Individuals: An Experimental Analysis of Monetary Policy Decision Making

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Committees Versus Individuals: An Experimental Analysis of Monetary Policy Decision Making

Author Info

Lombardelli, Clare
Proudman, James
Talbot, James

Abstract

We report the results of an experimental analysis of monetary policy decision making under uncertainty. A large sample of economics students played a simple monetary policy game, both as individuals and in committees of five players. Our findings - that groups make better decisions than individuals - accord with previous work by Blinder and Morgan. We also attempt to establish why this is so. Some of the improvement is related to the ability of committees to strip out the effect of bad play, but there is a significant additional improvement, which we associate with players learning from each other’s interest rate decisions.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 823.

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Date of creation: 08 Feb 2005
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Publication status: Published in International Journal of Central Banking Number 1.Volume 1(2005): pp. 181-205
Handle: RePEc:pra:mprapa:823

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Find related papers by JEL classification:
G00 - Financial Economics - - General - - - General
G0 - Financial Economics - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-12-04 (All new papers)
NEP-CBA-2006-12-04 (Central Banking)
NEP-CBE-2006-12-04 (Cognitive & Behavioural Economics)
NEP-CDM-2006-12-04 (Collective Decision-Making)
NEP-EXP-2006-12-04 (Experimental Economics)
NEP-MAC-2006-12-04 (Macroeconomics)
NEP-MON-2006-12-04 (Monetary Economics)
NEP-POL-2006-12-04 (Positive Political Economics)

References listed on IDEAS
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Lars E.O. Svensson & Michael Woodford, 2000. "Indicator Variables for Optimal Policy," NBER Working Papers 7953, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Svensson, Lars & Woodford, Michael, 2000. "Indicator Variables for Optimal Policy," Seminar Papers 688, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Lars E.O. Svensson & Michael Wooford, 2000. "Indicator variables for optimal policy," Working Paper Series 12, European Central Bank. [Downloadable!]
- Svensson, Lars E. O. & Woodford, Michael, 2003. "Indicator variables for optimal policy," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 691-720, April. [Downloadable!] (restricted)
- Lars E.O. Svensson & Michael Woodford, 2000. "Indicator variables for optimal policy," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
Alan S. Blinder & John Morgan, 2000. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," NBER Working Papers 7909, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Alan S. Blinder & John Morgan, 2001. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," Working Papers 130, Princeton University, Department of Economics, Center for Economic Policy Studies.. [Downloadable!]
Fuhrer, Jeff & Moore, George, 1995. "Inflation Persistence," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 127-59, February. [Downloadable!] (restricted)
Other versions:
- Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series 93-17, Board of Governors of the Federal Reserve System (U.S.).
- Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
- Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Blackwell Publishing, vol. 70(3), pages 649-665, 07. [Downloadable!] (restricted)
Other versions:
- Sibert, Anne, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CEPR Discussion Papers 2328, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Sibert, Anne, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]

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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.)

Stephen Hansen & Michael F. McMahon, 2008. "Delayed Doves: MPC Voting Behaviour of Externals," CEP Discussion Papers dp0862, Centre for Economic Performance, LSE. [Downloadable!]
Alan S. Blinder & John Morgan, 2007. "Leadership in Groups: A Monetary Policy Experiment," NBER Working Papers 13391, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Helge Berger & Volker Nitsch & Tonny Lybek, 2006. "Central Bank Boards Around the World: Why Does Membership Size Differ?," IMF Working Papers 06/281, International Monetary Fund. [Downloadable!]
Other versions:
- Helge Berger & Volker Nitsch & Tonny Lybek, 2007. "Central Bank Boards around the World: Why does Membership Size Differ?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Alan Blinder, 2006. "Monetary Policy by Committee: Why and How?," DNB Working Papers 092, Netherlands Central Bank, Research Department. [Downloadable!]
Other versions:
- Alan S. Blinder, 2005. "Monetary Policy by Committee: Why and How?," Working Papers 84, Princeton University, Department of Economics, Center for Economic Policy Studies.. [Downloadable!]
- Blinder, Alan S., 2007. "Monetary policy by committee: Why and how?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 106-123, March. [Downloadable!] (restricted)
Helge Berger, 2006. "Optimal Central Bank Design: Benchmarks for the ECB," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan standard," Proceedings, Federal Reserve Bank of Kansas City, issue Aug, pages 11-96. [Downloadable!]
Other versions:
- Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan Standard," Working Papers 88, Princeton University, Department of Economics, Center for Economic Policy Studies.. [Downloadable!]
John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Mar 2008. [Downloadable!]
Helge Berger & Volker Nitsch, 2008. "Too Many Cooks? Committees in Monetary Policy," Working papers 08-195, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
Other versions:
- Helge Berger & Volker Nitsch, 2008. "Too many Cooks? Committees in Monetary Policy," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]

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