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Monetary Policy Committees in Action: Is There Room for Improvement?

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  • Philipp Maier

Abstract

More than 80 central banks use a committee to take monetary policy decisions. The composition of the committee and the structure of the meeting can affect the quality of the decision making. In this paper we review economic, experimental, sociological and psychological studies to identify criteria for the optimal institutional setting of a monetary committee. These include the optimal size of the committee, measures to encourage independent thinking, a relatively informal structure of the meeting, and abilities to identify and evaluate individual members' performances. Using these criteria, we evaluate the composition and operation of monetary policy committees in various central banks. Our findings indicate that e.g. the monetary policy committee of the Bank of England follows committee best-practice, while the committee structure of other major central banks could be improved.

Suggested Citation

  • Philipp Maier, 2007. "Monetary Policy Committees in Action: Is There Room for Improvement?," Staff Working Papers 07-6, Bank of Canada.
    • Handle: RePEc:bca:bocawp:07-6
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    References listed on IDEAS

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    1. Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, August.
    2. Mr. Jerome Vandenbussche, 2006. "Elements of Optimal Monetary Policy Committee Design," IMF Working Papers 2006/277, International Monetary Fund.
    3. Christopher J. Waller, 2000. "Policy Boards and Policy Smoothing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 305-339.
    4. Nout Wellink & Bryan Chapple & Philipp Maier, 2002. "The role of national central banks within the European System of Central Banks: The example of De Nederlandsche Bank," Macroeconomics 0207006, University Library of Munich, Germany.
    5. Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, August.
    6. Whyte, Glen, 1993. "Escalating Commitment in Individual and Group Decision Making: A Prospect Theory Approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 54(3), pages 430-455, April.
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    Citations

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    Cited by:

    1. 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.
    2. Tim Aldridge & Amy Wood, 2014. "Monetary policy decision-making and accountability structures: some cross-country comparisons," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 77, pages 15-30, March.
    3. Helge Berger & Volker Nitsch, 2011. "Too Many Cooks? Committees in Monetary Policy," Southern Economic Journal, John Wiley & Sons, vol. 78(2), pages 452-475, October.
    4. Voutsinas, Konstantinos & Werner, Richard A., 2011. "New evidence on the effectiveness of "Quantitative Easing" in Japan," CFS Working Paper Series 2011/30, Center for Financial Studies (CFS).
    5. Alexander Jung & Francesco Paolo Mongelli & Philippe Moutot, 2010. "How are the Eurosystem's Monetary Policy Decisions Prepared? A Roadmap," Journal of Common Market Studies, Wiley Blackwell, vol. 48(2), pages 319-345, March.
    6. Cassola, Nuno & Kok, Christoffer & Mongelli, Francesco Paolo, 2019. "The ECB after the crisis: existing synergies among monetary policy, macroprudential policies and banking supervision," Occasional Paper Series 237, European Central Bank.
    7. repec:dau:papers:123456789/7716 is not listed on IDEAS
    8. repec:ces:ifodic:v:10:y:2012:i:1:p:18174973 is not listed on IDEAS
    9. 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.
    10. repec:bla:jcmkts:v:48:y:2010:i::p:319-345 is not listed on IDEAS
    11. Alessandro Riboni & Francisco J. Ruge-Murcia, 2010. "Monetary Policy by Committee: Consensus, Chairman Dominance, or Simple Majority?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 363-416.
    12. Jürgen Stark & Alexander Jung & Francesco Paolo Mongelli, 2012. "Normal Times versus Crisis Times," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(01), pages 03-08, April.
    13. Sirchenko, Andrei, 2010. "Policymakers' Votes and Predictability of Monetary Policy," University of California at San Diego, Economics Working Paper Series qt8qj3z3qg, Department of Economics, UC San Diego.
    14. 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.
    15. Lyonnet, Victor & Werner, Richard, 2012. "Lessons from the Bank of England on ‘quantitative easing’ and other ‘unconventional’ monetary policies," International Review of Financial Analysis, Elsevier, vol. 25(C), pages 94-105.
    16. 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.
    17. Jürgen Stark & Alexander Jung & Francesco Paolo Mongelli, 2012. "Normal Times versus Crisis Times," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(1), pages 03-09, 04.
    18. Philipp Maier & Eric Santor, 2008. "Reforming the IMF: Lessons from Modern Central Banking," Discussion Papers 08-6, Bank of Canada.
    19. repec:ces:ifodic:v:10:y:2012:i:1:p:03-08 is not listed on IDEAS

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    More about this item

    Keywords

    Central bank research; Monetary policy framework;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - 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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