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Communication in Monetary Policy Committees

  • Jan Marc Berk
  • Beata K. Bierut

This paper models monetary policy decisions as being taken by an interacting group of heterogeneous policy makers, organized in a MPC. We show that communication between members generally improves the quality of monetary policy by increasing knowledge about uncertain future economic developments. Interestingly, we find that it is sometimes beneficial to restrict communication to a subset of MPC members. We also show that the optimal size of a communicating MPC is generally smaller than otherwise. Compared with expanding the MPC, communication is a cost-e.ective way of increasing the quality of monetary policy.

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File URL: http://www.dnb.nl/binaries/Working%20Paper%2059_tcm46-146716.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 059.

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Date of creation: Nov 2005
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Handle: RePEc:dnb:dnbwpp:059
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Web page: http://www.dnb.nl/en/

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  1. Süppel, Ralph & von Hagen, Jürgen, 1994. "Central Bank Constitutions for Monetary Unions," CEPR Discussion Papers 919, C.E.P.R. Discussion Papers.
  2. Jan Marc Berk & Beata K. Bierut, 2005. "On the Optimality of Decisions made by Hub-and-Spokes Monetary Policy Committees," DNB Working Papers 027, Netherlands Central Bank, Research Department.
  3. Petra Gerlach-Kristen, 2009. "Outsiders at the Bank of England's MPC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1099-1115, 09.
  4. Marvin Goofriend, 1999. "The role of a regional bank in a system of central banks," Working Paper 99-04, Federal Reserve Bank of Richmond.
  5. repec:dgr:uvatin:20020006 is not listed on IDEAS
  6. 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 279-91, September.
  7. Carsten Hefeker, 2003. "Federal Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 643-659, December.
  8. 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 661-77, August.
  9. Bielinska-Kwapisz, Agnieszka, 2003. "Sufficiency in Blackwell's theorem," Mathematical Social Sciences, Elsevier, vol. 46(1), pages 21-25, August.
  10. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  11. 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 175-86, February.
  12. 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.
  13. Alan S. Blinder & John Morgan, 2001. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," Working Papers 130, Princeton University, Department of Economics, Center for Economic Policy Studies..
  14. Dino Gerardi & Leeat Yariv, 2003. "Putting Your Ballot Where Your Mouth Is: An Analysis of Collective Choice with Communication," UCLA Economics Working Papers 827, UCLA Department of Economics.
  15. Chappell, Henry W, Jr & Havrilesky, Thomas M & McGregor, Rob Roy, 1993. "Partisan Monetary Policies: Presidential Influence through the Power of Appointment," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 185-218, February.
  16. Clare Lombardelli & James Proudman & James Talbot, 2002. "Committees versus individuals: an experimental analysis of monetary policy decision-making," Bank of England working papers 165, Bank of England.
  17. 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, June.
  18. Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 649-665.
  19. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, June.
  20. repec:dgr:uvatin:20040120 is not listed on IDEAS
  21. Dino Gerardi & Leeat Yariv, 2003. "Putting Your Ballot Where you Mouth Is: An Analysis of Collective Choice," Levine's Working Paper Archive 506439000000000280, David K. Levine.
  22. repec:dgr:uvatin:2002006 is not listed on IDEAS
  23. Anne Sibert, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CESifo Working Paper Series 226, CESifo Group Munich.
  24. von Hagen, Jurgen & Suppel, Ralph, 1994. "Central bank constitutions for federal monetary unions," European Economic Review, Elsevier, vol. 38(3-4), pages 774-782, April.
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