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Collective versus individual Decision-Making: A case study of the Bank of Israel Law

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  • Ruge-Murcia, Francisco
  • Riboni, Alessandro

Abstract

The new Bank of Israel Law of 2010 changed monetary policy decision-making at the Bank of Israel from a setup where decisions are taken by the governor to one where decisions are taken by a committee of voting members. We use this institutional change as a natural experiment to compare individual versus collective decision-making. Empirical results show different dynamics for interest rate decisions across the two regimes and support the view that the status quo bias is larger when decisions are taken by a committee than when they are taken by a single individual.

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  • Ruge-Murcia, Francisco & Riboni, Alessandro, 2017. "Collective versus individual Decision-Making: A case study of the Bank of Israel Law," European Economic Review, Elsevier, vol. 93(C), pages 73-89.
    • Handle: RePEc:eee:eecrev:v:93:y:2017:i:c:p:73-89
    DOI: 10.1016/j.euroecorev.2017.01.003
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    11. 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.
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    Cited by:

    1. Tillmann, Peter, 2021. "Financial markets and dissent in the ECB’s Governing Council," European Economic Review, Elsevier, vol. 139(C).
    2. Jeffrey Campbell & Jacob Weber, 2021. "Discretion rather than rules: Equilibrium uniqueness and forward guidance with inconsistent optimal plans," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 243-254, July.
    3. Gnan, Phillipp & Rieder, Kilian, 2023. "The (not so) quiet period: Communication by ECB decision-makers during monetary policy blackout days☆," Journal of International Money and Finance, Elsevier, vol. 130(C).
    4. Moritz Grebe & Peter Tillmann, 2022. "Household Expectations and Dissent Among Policymakers," MAGKS Papers on Economics 202226, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Grebe, Moritz & Tillmann, Peter, 2022. "Household expectations and dissent among policymakers," IMFS Working Paper Series 169, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    6. Jeffrey R. Campbell & Thomas B. King & Anna Orlik & Rebecca Zarutskie, 2020. "Issues Regarding the Use of the Policy Rate Tool," Finance and Economics Discussion Series 2020-070, Board of Governors of the Federal Reserve System (U.S.).
    7. Ilek, Alex, 2021. "Are monetary surprises effective? The view of professional forecasters in Israel," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 516-530.
    8. Rieder, Kilian, 2022. "Monetary policy decision-making by committee: Why, when and how it can work," European Journal of Political Economy, Elsevier, vol. 72(C).
    9. Gnan, Phillipp & Rieder, Kilian, 2022. "The (Not So) Quiet Period: Communication by ECB Decision-makers during Monetary Policy Blackout Days," CEPR Discussion Papers 15735, C.E.P.R. Discussion Papers.
    10. Peter Tillmann, 2020. "Financial Markets and Dissent in the ECB’s Governing Council," MAGKS Papers on Economics 202048, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    11. 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.

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    More about this item

    Keywords

    Committees; Voting models; Political economy of central banking;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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