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The discursive dilemma in monetary policy

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  • Carl Andreas Claussen

    () (Sveriges Riksbank)

  • Øistein Røisland

    () (Norges Bank (Central Bank of Norway))

Abstract

The discursive dilemma implies that the policy decision of a board of policymakers depends on whether the board reaches the decision by voting directly on policy (conclusion-based procedure), or by voting on the premises for the decision (premise-based procedure). We derive results showing when the discursive dilemma may occur, both in a general model and in a standard monetary policy model. When the board aggregates by majority voting, a discursive dilemma can occur if either (i) the relationship between the premise and the decision is non-monotonic, or (ii) if the board members have different judgments on at least two of the premises. Normatively, a premise-based procedure tends to give better decisions when there is disagreement on parameters of the model.

Suggested Citation

  • Carl Andreas Claussen & Øistein Røisland, 2010. "The discursive dilemma in monetary policy," Working Paper 2010/05, Norges Bank.
  • Handle: RePEc:bno:worpap:2010_05 Note: First version:
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    Cited by:

    1. Lars E. O. Svensson, 2011. "Practical Monetary Policy: Examples from Sweden and the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 289-352.
    2. Vidal, Jean-Pierre & Maurin, Vincent, 2012. "Monetary policy deliberations: committee size and voting rules," Working Paper Series 1434, European Central Bank.
    3. Lars E.O. Svensson, 2012. "Practical Monetary Policy: Examples from Sweden and the United States," NBER Working Papers 17823, National Bureau of Economic Research, Inc.

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    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • 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

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