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

Author

Listed:
  • 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.

Suggested Citation

  • Szilárd Erhart & Jose Luis Vasquez-Paz, 2008. "Determinants of the size of a monetary policy committee: Theory and cross country evidence," Working Papers 2008-001, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2008-001
    as

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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, vol. 24(4), pages 817-832, December.
    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. Helge Berger, 2006. "Optimal central bank design: Benchmarks for the ECB," The Review of International Organizations, Springer, vol. 1(3), pages 207-235, September.
    6. Alan S. Blinder & John Morgan, 2000. "Are Two Heads Better than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," Working Papers 2000-1, Princeton University. Economics Department..
    7. Szilard Erhart & Harmen Lehment & Jose Vasquez Paz, 2010. "Monetary policy committee size and inflation volatility," International Economics and Economic Policy, Springer, vol. 7(4), pages 411-421, December.
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    9. Ms. JoAnne Morris & Mr. Tonny Lybek, 2004. "Central Bank Governance: A Survey of Boards and Management," IMF Working Papers 2004/226, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monetary policy.;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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