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How committees impact the volatility of policy rates

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  • Pierre-Guillaume Méon
  • Etienne Farvaque
  • Norimichi Matsueda

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 ULB Institutional Repository with number 2013/13608.

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Date of creation: Dec 2009
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Publication status: Published in: Journal of Macroeconomics (2009)
Handle: RePEc:ulb:ulbeco:2013/13608

Note: SCOPUS: ar.j
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Related research

Keywords: Monetary policy committees; Decision procedures; Interest-rate; M;

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Cited by:
  1. Bernd Hayo & Pierre-Guillaume Méon, 2013. "Behind closed doors: Revealing the ECB’s Decision Rule," Working Papers CEB 13-025, ULB -- Universite Libre de Bruxelles.

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