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Central Banking by Committee

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  • Anne Sibert

Abstract

A small economics literature on monetary policy making by committee is complemented by the literature on groups in the other social sciences. I review some of this work, focusing on the effect of size on group performance and whether committees are more moderate than individuals. Studies document that an individual's effort decreases with group size unless their contributions can be identified and evaluated and that committee membership is polarizing, tending to make committees more extreme. A particularly harmful form of group polarization occurs when a striving for consensus causes members to stop paying sufficient attention to alternative actions. The literature suggests that monetary policy committees should have a clear objective, publish individual votes and not have many more than five members. They should be structured so that members do not act as part of a group, perhaps by having short terms in office and members from outside the central bank. External scrutiny of the decision‐making process should be encouraged.

Suggested Citation

  • Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, August.
    • Handle: RePEc:bla:intfin:v:9:y:2006:i:2:p:145-168
    DOI: 10.1111/j.1468-2362.2006.00180.x
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    More about this item

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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