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Monetary Policy Committees in Action: Is There Room for Improvement?

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  • Philipp Maier

Abstract

More than 80 central banks use a committee to take monetary policy decisions. The composition of the committee and the structure of the meeting can affect the quality of the decision making. In this paper we review economic, experimental, sociological and psychological studies to identify criteria for the optimal institutional setting of a monetary committee. These include the optimal size of the committee, measures to encourage independent thinking, a relatively informal structure of the meeting, and abilities to identify and evaluate individual members' performances. Using these criteria, we evaluate the composition and operation of monetary policy committees in various central banks. Our findings indicate that e.g. the monetary policy committee of the Bank of England follows committee best-practice, while the committee structure of other major central banks could be improved.

Suggested Citation

  • Philipp Maier, 2007. "Monetary Policy Committees in Action: Is There Room for Improvement?," Staff Working Papers 07-6, Bank of Canada.
  • Handle: RePEc:bca:bocawp:07-6
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    References listed on IDEAS

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    1. Christopher J. Waller, 2000. "Policy Boards and Policy Smoothing," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 305-339.
    2. Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, August.
    3. Nout Wellink & Bryan Chapple & Philipp Maier, 2002. "The role of national central banks within the European System of Central Banks: The example of De Nederlandsche Bank," MEB Series (discontinued) 2002-13, Netherlands Central Bank, Monetary and Economic Policy Department.
    4. Jérôme Vandenbussche, 2006. "Elements of Optimal Monetary Policy Committee Design," IMF Working Papers 06/277, International Monetary Fund.
    5. Whyte, Glen, 1993. "Escalating Commitment in Individual and Group Decision Making: A Prospect Theory Approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 54(3), pages 430-455, April.
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    Citations

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    Cited by:

    1. Sirchenko, Andrei, 2010. "Policymakers' Votes and Predictability of Monetary Policy," University of California at San Diego, Economics Working Paper Series qt8qj3z3qg, Department of Economics, UC San Diego.
    2. 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.
    3. Tim Aldridge & Amy Wood, 2014. "Monetary policy decision-making and accountability structures: some cross-country comparisons," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 77, pages 15-30, March.
    4. repec:dau:papers:123456789/7716 is not listed on IDEAS
    5. repec:ces:ifodic:v:10:y:2012:i:1:p:18174973 is not listed on IDEAS
    6. Alessandro Riboni & Francisco J. Ruge-Murcia, 2010. "Monetary Policy by Committee: Consensus, Chairman Dominance, or Simple Majority?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 363-416.
    7. Jan Marc Berk & Beata K. Bierut, 2010. "Monetary Policy Committees: Meetings And Outcomes," Contemporary Economic Policy, Western Economic Association International, vol. 28(4), pages 569-588, October.
    8. 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.
    9. Jürgen Stark & Alexander Jung & Francesco Paolo Mongelli, 2012. "Normal Times versus Crisis Times," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(1), pages 03-09, 04.
    10. Philipp Maier & Eirc Santor, 2008. "Reforming the IMF: Lessons from Modern Central Banking," Discussion Papers 08-6, Bank of Canada.
    11. repec:ces:ifodic:v:10:y:2012:i:1:p:03-08 is not listed on IDEAS

    More about this item

    Keywords

    Central bank research; Monetary policy framework;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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