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Communication in a monetary policy committee: a note

Author

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  • Jan Marc Berk
  • Beata Bierut

Abstract

This paper models monetary policy decisions as being taken by an interacting group of heterogeneous policy makers, organized in a committee. Disclosing the premises on which an individual view on the interest rate is based is likely to provide value added in terms of the quality of the collective decision over-and-above simultaneous voting on interest rates. However, this is not generally true, as communication also involves a trade-off in the quality of views of committee members, which can lead to a reduction in the quality of collective decisions below the outcome achieved under simple majority voting. Still, communication is a relatively effective way to implement the 'knowledge pooling' argument pro-collective decision-making, compared to expanding the size of the MPC.

Suggested Citation

  • Jan Marc Berk & Beata Bierut, 2009. "Communication in a monetary policy committee: a note," DNB Working Papers 226, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:226
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    References listed on IDEAS

    as
    1. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, vol. 24(4), pages 817-832, December.
    2. 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.
    3. Jan Marc Berk & Beata Bierut, 2008. "Monetary Policy Committees: meetings and outcomes," DNB Working Papers 184, Netherlands Central Bank, Research Department.
    4. 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, September.
    5. Gerlach-Kristen, Petra, 2006. "Monetary policy committees and interest rate setting," European Economic Review, Elsevier, vol. 50(2), pages 487-507, February.
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    More about this item

    Keywords

    committees; deliberations; correlated votes; simple majority voting.;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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