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The Monetary Policy Committee and the Incentive Problem: A Selective Survey


  • Fujiki, Hiroshi

    (Bank of Japan)


This paper strives to answer five questions. First, why do legislators choose to create an independent central bank? Second, why do legislators delegate the conduct of monetary policy to a committee, rather than to a central bank governor? Third, what kinds of factors are crucial in limiting the size of the committee? Fourth, should the committee disclose individual members' voting records in addition to their policy decisions? Fifth, to what extent do current committee members constrain the decisions of future committee members? A selective review of the relevant economic literature suggests the conclusion that there is reasonable consensus on the first and second questions. The remaining three questions are still unresolved.

Suggested Citation

  • Fujiki, Hiroshi, 2005. "The Monetary Policy Committee and the Incentive Problem: A Selective Survey," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(S1), pages 37-82, October.
  • Handle: RePEc:ime:imemes:v:23:y:2005:i:s1:p:37-82

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    References listed on IDEAS

    1. C. H. Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," BIS Working Papers 70, Bank for International Settlements.
    2. Jackson, Patricia & Perraudin, William & Saporta, Victoria, 2002. "Regulatory and "economic" solvency standards for internationally active banks," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 953-976, May.
    3. Isabel Schnabel & Hyun Song Shin, 2004. "Liquidity and Contagion: The Crisis of 1763," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 929-968, December.
    4. Upper, Christian & Worms, Andreas, 2004. "Estimating bilateral exposures in the German interbank market: Is there a danger of contagion?," European Economic Review, Elsevier, vol. 48(4), pages 827-849, August.
    5. Douglas W. Diamond & Raghuram G. Rajan, 2005. "Liquidity Shortages and Banking Crises," Journal of Finance, American Finance Association, vol. 60(2), pages 615-647, April.
    6. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-968, October.
    7. George Sheldon & Martin Maurer, 1998. "Interbank Lending and Systemic Risk: An Empirical Analysis for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(IV), pages 685-704, December.
    8. Craig Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," Proceedings 633, Federal Reserve Bank of Chicago.
    9. Morris, Stephen & Shin, Hyun Song, 1999. "Risk Management with Interdependent Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 52-62, Autumn.
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    Cited by:

    1. Pierre L. Siklos & Matthias Neuenkirch, 2015. "How Monetary Policy Is Made: Two Canadian Tales," International Journal of Central Banking, International Journal of Central Banking, vol. 11(1), pages 225-250, January.
    2. Helge Berger, 2006. "Optimal central bank design: Benchmarks for the ECB," The Review of International Organizations, Springer, vol. 1(3), pages 207-235, September.
    3. Helge Berger & Volker Nitsc, 2011. "Too Many Cooks? Committees in Monetary Policy," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 452-475, October.
    4. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, vol. 24(4), pages 817-832, December.
    5. Janet L. Yellen, 2005. "Policymaking on the Federal Open Market Committee (FOMC): transparency and continuity," Speech 13, Federal Reserve Bank of San Francisco.
    6. Berk, Jan Marc & Bierut, Beata K., 2011. "Communication in a monetary policy committee," European Journal of Political Economy, Elsevier, vol. 27(4), pages 791-801.
    7. Roman Horváth & Katerina Šmídková & Jan Zápal, 2012. "Central Banks' Voting Records and Future Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 1-19, December.
    8. David-Jan Jansen & Richhild Moessner, 2016. "Communicating dissent on monetary policy: Evidence from central bank minutes," DNB Working Papers 512, Netherlands Central Bank, Research Department.
    9. Jan Marc Berk & Beata Bierut, 2008. "Monetary Policy Committees: meetings and outcomes," DNB Working Papers 184, Netherlands Central Bank, Research Department.
    10. Alexander Jung & Francesco Paolo Mongelli & Philippe Moutot, 2010. "How are the Eurosystem's Monetary Policy Decisions Prepared? A Roadmap," Journal of Common Market Studies, Wiley Blackwell, vol. 48, pages 319-345, March.
    11. Jung, Alexander & El-Shagi, Makram, 2015. "Has the publication of minutes helped markets to predict the monetary policy decisions of the Bank of England's MPC?," Working Paper Series 1808, European Central Bank.
    12. Christopher Spencer, 2014. "Conventional and Unconventional Votes: A Tale of Three Monetary Policy Committees," Discussion Paper Series 2014_11, Department of Economics, Loughborough University, revised Dec 2014.
    13. Esteban Colla de Robertis, 2010. "Monetary Policy Committees and the Decision to Publish Voting Records," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 97-139, July-Dece.
    14. El-Shagi, Makram & Jung, Alexander, 2015. "Have minutes helped markets to predict the MPC's monetary policy decisions?," European Journal of Political Economy, Elsevier, vol. 39(C), pages 222-234.
    15. Helge Berger, 2006. "Unfinished business? The ECB reform ahead of euro area enlargement," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(4), pages 35-41, December.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation


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