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Communication in a monetary policy committee

  • Berk, Jan Marc
  • Bierut, Beata K.
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    We model monetary policy decisions as being taken by a group of heterogeneous policy makers, organized in a committee. Intuitively, when MPC members disclose and discuss the arguments behind their view on the interest rate, the quality of the collective decision should be higher compared to merely taking a simultaneous vote. We show that in some cases this intuition need not be correct. We also find that communication is a relatively effective way to implement the ‘knowledge pooling’ argument in favor of collective decision-making, compared to expanding the size of a committee. Moreover, decision-making with internal communication appears generally more robust in situations when heterogeneity of members is not adequately captured by decision-making rules.

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    Article provided by Elsevier in its journal European Journal of Political Economy.

    Volume (Year): 27 (2011)
    Issue (Month): 4 ()
    Pages: 791-801

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    Handle: RePEc:eee:poleco:v:27:y:2011:i:4:p:791-801
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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