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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. Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, 08.
  2. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central Bank boards around the world: why does membership size differ?," Discussion Papers 2008/5, Free University Berlin, School of Business & Economics.
  3. Helge Berger, 2006. "Optimal central bank design: Benchmarks for the ECB," The Review of International Organizations, Springer, vol. 1(3), pages 207-235, September.
  4. JoAnne Morris & Tonny Lybek, 2004. "Central Bank Governance: A Survey of Boards and Management," IMF Working Papers 04/226, International Monetary Fund.
  5. Kiel, Alexandra & Gerling, Kerstin & Schulte, Elisabeth & Grüner, Hans Peter, 2003. "Information acquisition and decision making in committees: a survey," Working Paper Series 0256, European Central Bank.
  6. 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.
  7. 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.
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