How do central banks make decisions?

In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 55, Heft 4, S. 1643-1670

Abstract

AbstractThis paper studies decision making by the governing council of the Bank of Canada under two alternative protocols. The protocols are: (i) the median model and (ii) the inclusive‐voting model due to Riboni and Ruge‐Murcia (2020), where the chair and the median share proposal power. Results show that the data favour a version of the inclusive‐voting model where the chair of the committee is moderately inclusive and which endogenously generates the consensus outcome in Riboni and Ruge‐Murcia (2010). Decision‐making frictions are empirically important in the formulation of monetary policy, and the selected policy is the outcome of a compromise between committee members.