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Too Many Cooks? Committees in Monetary Policy

  • Helge Berger

    ()

    (Freie Universität Berlin, Economics Department, Berlin, Germany)

  • Volker Nitsch

    ()

    (ETH Zurich, KOF Swiss Economic Institute, Zurich, Switzerland)

How many people should decide about monetary policy? In this paper, we take an empirical perspective on this issue, analyzing the relationship between the number of monetary policy decision-makers and monetary policy outcomes. Using a new data set that characterizes Monetary Policy Committees (MPCs) in more than 30 countries from 1960 through 2000, we find a U-shaped relation between the membership size of MPCs and inflation; our results suggest that the lowest level of inflation is reached at MPCs with about seven to ten members. Similar results are obtained for other measures, such as inflation variability and output growth. We also find that MPC size influences the success of monetary targeting regimes. In contrast, there is no evidence that either turnover rates of MPC members or the membership composition of MPCs affect economic outcomes.

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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 08-195.

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Length: 28 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:kof:wpskof:08-195
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  1. 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.
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