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Central Banking by Committee

  • Anne Sibert

A small economics literature on monetary policy making by committee is complemented by the literature on groups in the other social sciences. I review some of this work, focusing on the effect of size on group performance and whether committees are more moderate than individuals. Studies document that an individual's effort decreases with group size unless their contributions can be identified and evaluated and that committee membership is polarizing, tending to make committees more extreme. A particularly harmful form of group polarization occurs when a striving for consensus causes members to stop paying sufficient attention to alternative actions. The literature suggests that monetary policy committees should have a clear objective, publish individual votes and not have many more than five members. They should be structured so that members do not act as part of a group, perhaps by having short terms in office and members from outside the central bank. External scrutiny of the decision-making process should be encouraged. Copyright 2006 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal International Finance.

Volume (Year): 9 (2006)
Issue (Month): 2 (08)
Pages: 145-168

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Handle: RePEc:bla:intfin:v:9:y:2006:i:2:p:145-168
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  1. Eduardo Ley & Mark F.J. Steel, 1998. "A model of management teams," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(6), pages 355-363.
  2. Kiel, Alexandra & Gerling, Kerstin & Schulte, Elisabeth & GrĂ¼ner, Hans Peter, 2003. "Information acquisition and decision making in committees: a survey," Working Paper Series 0256, European Central Bank.
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