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Determinants of the size of a monetary policy committee: Theory and cross country evidence

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  • Szilárd Erhart

    (Central Bank of Hungary)

  • Jose Luis Vasquez-Paz

    ()
    (Banco Central de Reserva del Perú)

Abstract

Theoretical and empirical studies of different sciences suggest that an optimal committee consists of roughly 5-9 members, although it can swell mildly under specific circumstances. This paper develops a conceptual model in order to analyze the issue in case of monetary policy formulation. The number of monetary policy committee (MPC) size varies according to the size of the monetary zone and overall economic stability. Our conceptual model is backed up with econometric evidence using a 2006 survey of 85 countries. The survey is available for further research and published on the web. The MPC size of large monetary zones (EMU, USA, Japan) is close to the estimated optimal level, but there exist several smaller countries with too many or too few MPC members.

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Bibliographic Info

Paper provided by Banco Central de Reserva del Perú in its series Working Papers with number 2008-001.

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Date of creation: Jan 2008
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Handle: RePEc:rbp:wpaper:2008-001

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Keywords: Monetary policy.;

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References

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  1. Gerling, Kerstin & Gruner, Hans Peter & Kiel, Alexandra & Schulte, Elisabeth, 2005. "Information acquisition and decision making in committees: A survey," European Journal of Political Economy, Elsevier, vol. 21(3), pages 563-597, September.
  2. Helge Berger, 2006. "Optimal Central Bank Design: Benchmarks for the ECB," CESifo Working Paper Series 1697, CESifo Group Munich.
  3. 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.
  4. Gabel, Matthew J. & Shipan, Charles R., 2004. "A social choice approach to expert consensus panels," Journal of Health Economics, Elsevier, vol. 23(3), pages 543-564, May.
  5. Szilárd Erhart & Harmen Lehment & Jose L. Vasquez Paz, 2007. "Monetary Policy Committee Size and Inflation Volatility," Kiel Working Papers 1377, Kiel Institute for the World Economy.
  6. Sibert, Anne, 2006. "Central Banking by Committee," CEPR Discussion Papers 5626, C.E.P.R. Discussion Papers.
  7. JoAnne Morris & Tonny Lybek, 2004. "Central Bank Governance," IMF Working Papers 04/226, International Monetary Fund.
  8. Clare Lombardelli & James Proudman & James Talbot, 2002. "Committees versus individuals: an experimental analysis of monetary policy decision-making," Bank of England working papers 165, Bank of England.
  9. Helge Berger & Tonny Lybek & Volker Nitsch, 2006. "Central Bank Boards Around the World," IMF Working Papers 06/281, International Monetary Fund.
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