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How monetary policy committees impact the volatility of policy rates

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  • Etienne Farvaque
  • Norimichi Matsueda
  • Pierre-Guillaume Méon

Abstract

This paper relates the volatility of interest rates to the collective nature of monetary policymaking in monetary unions. Several decision rules are modelled, including hegemonic and democratic procedures, and also committees headed by a chairman. A ranking of decision rules in terms of the volatility of policy rates is obtained, showing that the presence of a chairman has a cooling effect. However, members of a monetary union are better off under symmetric rules (voting, averaging, bargaining), unless they themselves chair the union. The results are robust to the inclusion of heterogeneities among members of the monetary union.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 08-026.RS.

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Length: 30 p.
Date of creation: 2008
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:08-026

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Keywords: Monetary Policy Committees; Decision Procedures; Interest-rate; Monetary Union;

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References

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Citations

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Cited by:
  1. Volker Hahn, 2012. "Designing Monetary Policy Committees," Working Paper Series of the Department of Economics, University of Konstanz 2012-23, Department of Economics, University of Konstanz.
  2. Roman Horvath & Katerina Smidkova & Jan Zapal, 2010. "Central Banks' Voting Records and Future Policy," Working Papers 2010/11, Czech National Bank, Research Department.
  3. Maurin, Vincent & Vidal, Jean-Pierre, 2012. "Monetary policy deliberations: committee size and voting rules," Working Paper Series 1434, European Central Bank.
  4. Dumiter Florin Cornel, 2012. "The Crucial Role Of Central Bank Transparency In Assessing The Monetary Policy Committee Mechanism," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 557-563, December.
  5. Tim Aldridge & Amy Wood, 2014. "Monetary policy decision-making and accountability structures: some cross-country comparisons," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 77, pages 15-30, March.
  6. Etienne Farvaque & Hakim Hammadou & Piotr Stanek, 2011. "Selecting Your Inflation Targeters: Background and Performance of Monetary Policy Committee Members," German Economic Review, Verein für Socialpolitik, vol. 12(2), pages 223-238, 05.

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