On the Optimality of Decisions made by Hub-and-Spokes Monetary Policy Committees
Most monetary policy committees decide on interest rates using a simple majority voting rule. Given the inherent heterogeneity of committee members, this voting rule is suboptimal in terms of the quality of the interest rate decision, but popular for other (political) reasons. We show that a clustering of committee members into two subgroups, as is the case in hub-and-spokes systems of central banks (e.g. the Fed or the ESCB), can eliminate this inefficiency whilst retaining the simple majority voting rule.
|Date of creation:||Feb 2005|
|Contact details of provider:|| Postal: Postbus 98, 1000 AB Amsterdam|
Web page: http://www.dnb.nl/en/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barro, Robert J & Gordon, David B, 1983.
"A Positive Theory of Monetary Policy in a Natural Rate Model,"
Journal of Political Economy,
University of Chicago Press, vol. 91(4), pages 589-610, August.
- Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
- Ben-Yashar, Ruth C & Nitzan, Shmuel I, 1997. "The Optimal Decision Rule for Fixed-Size Committees in Dichotomous Choice Situations: The General Result," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 175-186, February.
- Belden, Susan, 1989. "Policy Preferences of FOMC Members as Revealed by Dissenting Votes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(4), pages 432-441, November.
- Carsten Hefeker, 2003. "Federal Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 643-659, December.
- Carsten Hefeker, 2001. "Federal Monetary Policy," CESifo Working Paper Series 422, CESifo Group Munich.
- Marvin Goodfriend, 2000. "The role of a regional bank in a system of central banks," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 7-25.
- Goodfriend, Marvin, 1999. "The role of a regional bank in a system of central banks," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 51(1), pages 51-71, December.
- Marvin Goodfriend, 1999. "The role of a regional bank in a system of central banks," Working Paper 99-04, Federal Reserve Bank of Richmond.
- Meade, Ellen E & Sheets, D Nathan, 2005. "Regional Influences on FOMC Voting Patterns," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 661-677, August.
- Kaushik Mukhopadhaya, 2003. "Jury Size and the Free Rider Problem," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 24-44, April.
- Hans Gersbach & Volker Hahn, 2008. "Should the individual voting records of central bankers be published?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(4), pages 655-683, May.
- Hahn, Volker & Gersbach, Hans, 2001. "Should the Individual Voting Records of Central Bankers be Published?," Discussion Paper Series 1: Economic Studies 2001,02, Deutsche Bundesbank, Research Centre.
- Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 165-191.
- Hahn, Volker & Gersbach, Hans, 2001. "Voting Transparency and Conflicting Interests in Central Bank Councils," Discussion Paper Series 1: Economic Studies 2001,03, Deutsche Bundesbank, Research Centre.
- Gradstein, Mark & Nitzan, Shmuel & Paroush, Jacob, 1990. "Collective Decision Making and the Limits on the Organization's Size," Public Choice, Springer, vol. 66(3), pages 279-291, September.
- Gildea, John A, 1992. "The Regional Representation of Federal Reserve Bank Presidents," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 215-225, May.
- Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2005. "Committee Decisions on Monetary Policy: Evidence from Historical Records of the Federal Open Market Committee," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033305, July.
- Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, July.
- Timothy Feddersen & Wolfgang Pesendorfer, 1996. "Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts," Discussion Papers 1170, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Philippe Robert-Demontrond & R. Ringoot, 2004. "Introduction," Post-Print halshs-00081823, HAL.
- Chappell, Henry Jr. & Havrilesky, Thomas M. & McGregor, Rob Roy, 1995. "Policymakers, institutions, and central bank decisions," Journal of Economics and Business, Elsevier, vol. 47(2), pages 113-136, May. Full references (including those not matched with items on IDEAS)