Suchergebnisse

We model monetary policy decisions as being taken by a group of heterogeneous policy makers, organized in a committee. Intuitively, when MPC members disclose and discuss the arguments behind their view on the interest rate, the quality of the collective decision should be higher compared to merely taking a simultaneous vote. We show that in some cases this intuition need not be correct. We also find that communication is a relatively effective way to implement the "knowledge pooling" argument in favor of collective decision-making, compared to expanding the size of a committee. Moreover, decision-making with internal communication appears generally more robust in situations when heterogeneity of members is not adequately captured by decision-making rules. [Copyright Elsevier B.V.]

Monetary Policy Committees (MPCs) differ in the way the interest rate proposal is prepared and presented in the policy meeting. In this paper, we show analytically how different arrangements could affect the voting behavior of individual MPC members and therefore policy outcomes. We then apply our results to the Bank of England and the Federal Reserve. A general finding is that when MPC members are not too diverse in terms of expertise and experience, policy discussions should not be based on preprepared policy options. Instead, interest rate proposals should arise endogenously as a majority of views expressed by the members, as is the case at the Bank of England and appears to be the case in the Federal Open Market Committee (FOMC) under Chairman Bernanke. (JEL E58, D71, D78)

Monetary Policy Committees differ in the way the interest rate proposal is prepared and presented in the policy meeting. In this paper we show analytically how different arrangements could affect the voting behaviour of individual MPC members and therefore policy outcomes. We then apply our results to the Bank of England and the Federal Reserve. A general finding is that when MPC members are not too diverse in terms of expertise and experience, policy discussions should not be based on pre- prepared policy options. Instead, interest rate proposals should arise endogenously as a majority of views expressed by the members, as is the case at the Bank of England and appears to be the case in the FOMC under Chairman Bernanke.