IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v28y2010i4p569-588.html
   My bibliography  Save this article

Monetary Policy Committees: Meetings And Outcomes

Author

Listed:
  • JAN MARC BERK
  • BEATA K. BIERUT

Abstract

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)

Suggested Citation

  • Jan Marc Berk & Beata K. Bierut, 2010. "Monetary Policy Committees: Meetings And Outcomes," Contemporary Economic Policy, Western Economic Association International, vol. 28(4), pages 569-588, October.
    • Handle: RePEc:bla:coecpo:v:28:y:2010:i:4:p:569-588
    DOI: 10.1111/j.1465-7287.2009.00194.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1465-7287.2009.00194.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1465-7287.2009.00194.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Arnab Bhattacharjee & Sean Holly, 2004. "Inflation Targeting, committee Decision Making and Uncertainty: The case of the Bank of England's MPC," Money Macro and Finance (MMF) Research Group Conference 2004 63, Money Macro and Finance Research Group.
    2. Philipp Maier, 2007. "Monetary Policy Committees in Action: Is There Room for Improvement?," Staff Working Papers 07-6, Bank of Canada.
    3. Carsten Hefeker, 2003. "Federal Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 643-659, December.
    4. Waller, Christopher J., 1992. "A bargaining model of partisan appointments to the central bank," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 411-428, June.
    5. 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.
    6. Blinder, Alan S., 2007. "Monetary policy by committee: Why and how?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 106-123, March.
    7. Hong, Lu & Page, Scott E., 2001. "Problem Solving by Heterogeneous Agents," Journal of Economic Theory, Elsevier, vol. 97(1), pages 123-163, March.
    8. Gerardi, Dino, 2000. "Jury Verdicts and Preference Diversity," American Political Science Review, Cambridge University Press, vol. 94(2), pages 395-406, June.
    9. Coughlan, Peter J., 2000. "In Defense of Unanimous Jury Verdicts: Mistrials, Communication, and Strategic Voting," American Political Science Review, Cambridge University Press, vol. 94(2), pages 375-393, June.
    10. Christina D. Romer & David H. Romer, 2004. "Choosing the Federal Reserve Chair: Lessons from History," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 129-162, Winter.
    11. Hao Li & Sherwin Rosen & Wing Suen, 2001. "Conflicts and Common Interests in Committees," American Economic Review, American Economic Association, vol. 91(5), pages 1478-1497, December.
    12. EllenE. Meade & David Stasavage, 2008. "Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve," Economic Journal, Royal Economic Society, vol. 118(528), pages 695-717, April.
    13. Christopher Spencer, 2006. "The Dissent Voting Behaviour of Bank of England MPC Members," School of Economics Discussion Papers 0306, School of Economics, University of Surrey.
    14. Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 649-665.
    15. Groth, Charlotta & Wheeler, Tracy, 2008. "The behaviour of the MPC: Gradualism, inaction and individual voting patterns," Discussion Papers 21, Monetary Policy Committee Unit, Bank of England.
    16. Austen-Smith, David & Banks, Jeffrey S., 1996. "Information Aggregation, Rationality, and the Condorcet Jury Theorem," American Political Science Review, Cambridge University Press, vol. 90(1), pages 34-45, March.
    17. Chappell, Henry W, Jr & McGregor, Rob Roy & Vermilyea, Todd, 2004. "Majority Rule, Consensus Building, and the Power of the Chairman: Arthur Burns and the FOMC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 407-422, June.
    18. Süppel, Ralph & von Hagen, Jürgen, 1994. "Central Bank Constitutions for Monetary Unions," CEPR Discussion Papers 919, C.E.P.R. Discussion Papers.
    19. 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.
    20. Job Swank & Otto H. Swank & Bauke Visser, 2008. "How Committees of Experts Interact with the Outside World: Some Theory, and Evidence from the FOMC," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 478-486, 04-05.
    21. Bauke Visser & Otto H. Swank, 2007. "On Committees of Experts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 337-372.
    22. Nicola Persico, 2004. "Committee Design with Endogenous Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 165-191.
    23. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    24. Gerlach-Kristen, Petra, 2006. "Monetary policy committees and interest rate setting," European Economic Review, Elsevier, vol. 50(2), pages 487-507, February.
    25. Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2007. "The Role of the Bias in Crafting Consensus: FOMC Decision Making in the Greenspan Era," International Journal of Central Banking, International Journal of Central Banking, vol. 3(2), pages 39-60, June.
    26. Henry Chappell & Rob McGregor & Todd Vermilyea, 2007. "The persuasive power of a Committee Chairman: Arthur Burns and the FOMC," Public Choice, Springer, vol. 132(1), pages 103-112, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Berk, Jan Marc & Bierut, Beata K., 2011. "Communication in a monetary policy committee," European Journal of Political Economy, Elsevier, vol. 27(4), pages 791-801.
    2. Charemza, Wojciech & Ladley, Daniel, 2016. "Central banks’ forecasts and their bias: Evidence, effects and explanation," International Journal of Forecasting, Elsevier, vol. 32(3), pages 804-817.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francisco Ruge‐Murcia, 2022. "How do central banks make decisions?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(4), pages 1643-1670, November.
    2. Alan S. Blinder, 2009. "Making Monetary Policy by Committee," International Finance, Wiley Blackwell, vol. 12(2), pages 171-194, August.
    3. Jan Marc Berk & Beata K. Bierut, 2005. "Communication in Monetary Policy Committees," DNB Working Papers 059, Netherlands Central Bank, Research Department.
    4. Alessandro Riboni & Francisco J. Ruge-Murcia, 2008. "The Dynamic (In)Efficiency of Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(5), pages 1001-1032, August.
    5. Swank, Otto H. & Visser, Bauke, 2023. "Committees as active audiences: Reputation concerns and information acquisition," Journal of Public Economics, Elsevier, vol. 221(C).
    6. Gerlach-Kristen, Petra, 2006. "Monetary policy committees and interest rate setting," European Economic Review, Elsevier, vol. 50(2), pages 487-507, February.
    7. repec:dau:papers:123456789/7716 is not listed on IDEAS
    8. Berk, Jan Marc & Bierut, Beata K., 2011. "Communication in a monetary policy committee," European Journal of Political Economy, Elsevier, vol. 27(4), pages 791-801.
    9. El-Shagi, Makram & Jung, Alexander, 2015. "Does the Greenspan era provide evidence on leadership in the FOMC?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 173-190.
    10. Mikael Apel & Carl Andreas Claussen & Petra Gerlach-Kristen & Petra Lennartsdotter & Øistein Røisland, 2013. "Monetary policy decisions – comparing theory and “inside” information from MPC members," Working Paper 2013/03, Norges Bank.
    11. repec:pri:cepsud:167blinder is not listed on IDEAS
    12. Helge Berger, 2006. "Optimal central bank design: Benchmarks for the ECB," The Review of International Organizations, Springer, vol. 1(3), pages 207-235, September.
    13. Hansen, Stephen & McMahon, Michael & Velasco Rivera, Carlos, 2014. "Preferences or private assessments on a monetary policy committee?," Journal of Monetary Economics, Elsevier, vol. 67(C), pages 16-32.
    14. Lähner, Tom, 2015. "Inconsistent voting behavior in the FOMC," Hannover Economic Papers (HEP) dp-546, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    15. Alan S. Blinder, 2009. "Making Monetary Policy by Committee," International Finance, Wiley Blackwell, vol. 12(2), pages 171-194, August.
    16. Jan Marc Berk & Beata K. Bierut, 2005. "On the Optimality of Decisions made by Hub-and-Spokes Monetary Policy Committees," DNB Working Papers 027, Netherlands Central Bank, Research Department.
    17. Jan Marc Berk & Beata Bierut, 2004. "On the Optimality of Decisions," Tinbergen Institute Discussion Papers 04-120/2, Tinbergen Institute.
    18. Ronen Gradwohl, 2018. "Voting in the limelight," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(1), pages 65-103, July.
    19. Keiichi Morimoto, 2021. "Information Use and the Condorcet Jury Theorem," Mathematics, MDPI, vol. 9(10), pages 1-22, May.
    20. Quement, Mark T. Le & Marcin, Isabel, 2020. "Communication and voting in heterogeneous committees: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 449-468.
    21. Etienne Farvaque & Norimichi Matsueda & Pierre-Guillaume Méon, 2007. "How committees reduce the volatility of policy rates," DULBEA Working Papers 07-11.RS, ULB -- Universite Libre de Bruxelles.
    22. Jan C. van Ours, 2022. "How Retirement Affects Mental Health, Cognitive Skills and Mortality; an Overview of Recent Empirical Evidence," Tinbergen Institute Discussion Papers 22-050/V, Tinbergen Institute.

    More about this item

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:28:y:2010:i:4:p:569-588. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.