Making Monetary Policy by Committee
AbstractI was Vice Chairman of the Federal Reserve Board while I was preparing my Marshall Lectures for delivery at Cambridge in 1995. So I asked the Board staff to research what had been written about making monetary policy by committees—as opposed to by individuals. Although they were (and remain) a knowledgeable and thorough bunch, they unearthed almost nothing. So when I delivered the Robbins Lectures at the London School of Economics the following year,1 this is what I concluded on the subject: My own hunch is that, on balance, the additional monetary policy inertia imparted by group decisionmaking provides a net benefit to society… But my main point is simpler: My experience as a member of the FOMC left me with a strong feeling that the theoretical fiction that monetary policy is made by a single individual maximizing a well-defined preference function misses something important. In my view, monetary theorists should start paying some attention to the nature of decisionmaking by committee, which is rarely mentioned in the academic literature. (Blinder (1998), p. 22) I made reference in that lecture to only one paper on the subject, Faust’s (1996) clever model of the seemingly-odd construction of the FOMC, though I should have cited Waller’s (1992) earlier work as well. (Mea culpa.) My point is that, up to then, there had been hardly any research on committee decisionmaking. Fortunately, that is no longer the case. By the time of my three Okun lectures at Yale in 2002 (Blinder (2004)), the subject merited a whole lecture, including references to about ten papers on the subject—and I missed some. (Mea culpa again.) The literature has continued to grow since then, including seven papers at a Netherlands Central Bank conference in 2005 and eleven papers at a Bank of Norway conference last year. The study of central banking by committee thus appears to be a growth industry, albeit a small one.
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Bibliographic InfoPaper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number 1051.
Date of creation: Jun 2008
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- Anne Sibert, 2006.
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- Waller, Christopher J., 1992. "A bargaining model of partisan appointments to the central bank," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 411-428, June.
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- Alan Blinder, 2006. "Monetary Policy by Committee: Why and How?," DNB Working Papers 092, Netherlands Central Bank, Research Department.
- Clare Lombardelli & James Proudman & James Talbot, 2005. "Committees Versus Individuals: An Experimental Analysis of Monetary Policy Decision-Making," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
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- Svensson, Lars E O, 2009. "Transparency under Flexible Inflation Targeting: Experiences and Challenges," CEPR Discussion Papers 7213, C.E.P.R. Discussion Papers.
- Petra Gerlach-Kristen & Ellen E. Meade, 2010. "Is There a Limit on FOMC Dissents? Evidence from the Greenspan Era," Working Papers 2010-16, American University, Department of Economics.
- Yann Braouezec, 2010. "Committee, Expert Advice, and the Weighted Majority Algorithm: An Application to the Pricing Decision of a Monopolist," Computational Economics, Society for Computational Economics, vol. 35(3), pages 245-267, March.
- Christian Pierdzioch & Jan-Christoph Rülke & Peter Tillmann, 2013. "Using forecasts to uncover the loss function of FOMC members," MAGKS Papers on Economics 201302, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Johnson, Eric D. & Ellis, Michael A. & Kotenko, Diana, 2012. "Consensus building on the FOMC: An analysis of end of tenure policy preferences," Economics Letters, Elsevier, vol. 117(1), pages 368-371.
- Muchlinski, Elke, 2010. "Metaphern, Begriffe und Bedeutungen: Das Beispiel internationale monetäre Institutionen," Discussion Papers 2010/14, Free University Berlin, School of Business & Economics.
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