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The effects of Learning in Interactive Monetary Policy Committees

Author

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  • Jan Marc Berk
  • Beata K. Bierut

Abstract

We develop a theoretical framework for studying the effects of interaction on the quality of decision-making by monetary policy committees. We show that interaction, is increasing one's expertise through an exchange of views, is most likely not to result in interdependent voting behaviour. Therefore, and in contrast to earlier literature, we find that interaction is beneficial for the collective outcome.

Suggested Citation

  • Jan Marc Berk & Beata K. Bierut, 2004. "The effects of Learning in Interactive Monetary Policy Committees," MEB Series (discontinued) 2004-01, Netherlands Central Bank, Monetary and Economic Policy Department.
  • Handle: RePEc:dnb:mebser:2004-01
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    File URL: https://www.dnb.nl/binaries/serie2004-01_tcm46-147350.pdf
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    References listed on IDEAS

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    1. Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 649-665.
    2. Clare Lombardelli & James Proudman & James Talbot, 2005. "Committees Versus Individuals: An Experimental Analysis of Monetary Policy Decision-Making," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
    3. repec:cup:apsrev:v:90:y:1996:i:01:p:34-45_20 is not listed on IDEAS
    4. 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.
    5. 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.
    6. 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.
    7. Carsten Hefeker, 2003. "Federal Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 643-659, December.
    8. Alan S. Blinder & John Morgan, 2000. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," NBER Working Papers 7909, National Bureau of Economic Research, Inc.
    9. 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.
    10. Berk, J.M. & Bierut, B.K., 2003. "Committee structure and its implications for monetary policy decision-making," Serie Research Memoranda 0006, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    11. 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.
    12. Süppel, Ralph & von Hagen, Jürgen, 1994. "Central Bank Constitutions for Monetary Unions," CEPR Discussion Papers 919, C.E.P.R. Discussion Papers.
    13. Sen, Amartya K, 1977. "Social Choice Theory: A Re-examination," Econometrica, Econometric Society, vol. 45(1), pages 53-89, January.
    14. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, January.
    15. Jan Marc Berk & Beata K. Bierut, 2003. "Committee structure and its implications for Monetary policy decision-making," MEB Series (discontinued) 2003-05, Netherlands Central Bank, Monetary and Economic Policy Department.
    16. 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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    Citations

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    Cited by:

    1. Helge Berger, 2006. "Optimal central bank design: Benchmarks for the ECB," The Review of International Organizations, Springer, vol. 1(3), pages 207-235, September.
    2. Helge Berger & Volker Nitsc, 2011. "Too Many Cooks? Committees in Monetary Policy," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 452-475, October.
    3. 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.

    More about this item

    Keywords

    monetary policy; interest rates; learning;

    JEL classification:

    • 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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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