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Collective versus individual Decision-Making: A case study of the Bank of Israel Law

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  • Ruge-Murcia, Francisco
  • Riboni, Alessandro

Abstract

The new Bank of Israel Law of 2010 changed monetary policy decision-making at the Bank of Israel from a setup where decisions are taken by the governor to one where decisions are taken by a committee of voting members. We use this institutional change as a natural experiment to compare individual versus collective decision-making. Empirical results show different dynamics for interest rate decisions across the two regimes and support the view that the status quo bias is larger when decisions are taken by a committee than when they are taken by a single individual.

Suggested Citation

  • Ruge-Murcia, Francisco & Riboni, Alessandro, 2017. "Collective versus individual Decision-Making: A case study of the Bank of Israel Law," European Economic Review, Elsevier, vol. 93(C), pages 73-89.
  • Handle: RePEc:eee:eecrev:v:93:y:2017:i:c:p:73-89
    DOI: 10.1016/j.euroecorev.2017.01.003
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    References listed on IDEAS

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    1. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
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    More about this item

    Keywords

    Committees; Voting models; Political economy of central banking;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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