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Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve

  • Ellen E. Meade
  • David Stasavage

When central banks are transparent about their decision making, there may be clear benefits in terms ofcredibility, policy effectiveness, and improved democratic accountability. While recent literature has focusedon all of these advantages of transparency, in this paper we consider one potential cost: the possibility thatpublishing detailed records of deliberations will make members of a monetary policy committee more reluctantto offer dissenting opinions. Drawing on the recent literature on expert advisors with ¿career concerns¿, weconstruct a model that compares incentives for members of a monetary policy committee to voice dissent whendeliberations occur in public, and when they occur in private. We then test the implications of the model usingan original dataset based on deliberations of the Federal Reserve¿s Federal Open Market Committee, askingwhether the FOMC¿s decision in 1993 to begin releasing full transcripts of its meetings has altered incentivesfor participants to voice dissenting opinions. We find this to be the case with regard to both opinions on shortterminterest rates and on the ¿bias¿ for future policy.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0608.

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Date of creation: Jan 2004
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Handle: RePEc:cep:cepdps:dp0608
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Andrea Prat, 2004. "The wrong kind of transparency," LSE Research Online Documents on Economics 24712, London School of Economics and Political Science, LSE Library.
  2. Faust, Jon & Svensson, Lars E O, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," CEPR Discussion Papers 1852, C.E.P.R. Discussion Papers.
  3. Petra Gerlach-Kristen, 2004. "Is the MPC's Voting Record Informative about Future UK Monetary Policy?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 299-313, 06.
  4. Gilat Levy, 2004. "Anti-herding and strategic consultation," LSE Research Online Documents on Economics 541, London School of Economics and Political Science, LSE Library.
  5. Donald L. Kohn & Brian P. Sack, 2003. "Central bank talk: does it matter and why?," Finance and Economics Discussion Series 2003-55, Board of Governors of the Federal Reserve System (U.S.).
  6. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2003. "Does monetary policy transparency reduce disinflation costs?," Manchester School, University of Manchester, vol. 71(5), pages 521-540, 09.
  8. Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Manchester School, University of Manchester, vol. 71(5), pages 478-497, 09.
  9. Marvin Goodfriend, 1985. "Monetary mystique : secrecy and central banking," Working Paper 85-07, Federal Reserve Bank of Richmond.
  10. Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September.
  11. Daniel Thornton & David C. Wheelock, 2000. "A history of the asymmetric policy directive," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 1-16.
  12. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
  13. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
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