Influence and Interactions in Monetary Policy Committees

SSRN Electronic Journal, 2000

European Journal of Political Economy, 2009

European Journal of Political Economy, 2011

2014

Committee Decision Making in Monetary Policy by Hyungju Cha Advisor: Professor Merih Uctum One reason of the criticism about Taylor rule would be that the rule could not provide a micro foundation about the decision-making mechanism. because it is simply describing the policy process in terms of the short-term nominal interest rate. In order to reconcile the tension between critics and supporters of Taylor rule, chapter I employs the theory of team, which investigates how members in a team interact to determine optimal decisions. Using team theory, it is shown how optimal monetary policy is results from committee members' interactions. In chapter II, if the government cannot recognizes that the monetary policy can affect the economy with a lag or if observed data for decision-making is real-time data, following Orphanides (2001, 2003), this policy is not effective as much as their expectation. From Friedman's metaphor of "Fool in the shower", it is reasonable to in...

This paper studies the theoretical and empirical implications of monetary policy decision making by committee under two di voting protocols. In the model, interest rate decisions are made by voting with a super majority requirement for a pro-posal to pass. In the second model, committee members engage in an agenda-setting game where the chairman has more power than the other members. Both models endogenously generate interest rate autocorrelation and an inaction region where the interest rate remains unchanged even if output and innation have changed since the last meeting. The models are estimated by the Method of Maximum Likelihood using interest rate decision from four central banks. Preliminary results indicate that the consensus model the data more accurately than the agenda-setting model. Either model of committee decision making delivers a smaller Root Mean Squared Error than an alternative model with a single central banker.

International Journal of Central Banking, 2008

This paper models monetary policy decisions as being taken by an interacting group of heterogeneous policy makers, organized in a MPC. We show that communication between members generally improves the quality of monetary policy by increasing knowledge about uncertain future economic developments. Interestingly, we find that it is sometimes beneficial to restrict communication to a subset of MPC members. We also show that the optimal size of a communicating MPC is generally smaller than otherwise. Compared with expanding the MPC, communication is a cost-e.ective way of increasing the quality of monetary policy.

Journal of Money, Credit, and Banking, 2005

2006

2014

The article aims at surveying the economic literature related to collective decision making in monetary policy. In order to do so it proposes a coherent framework allowing for a structured analysis of the factors influencing the works of a monetary policy committee. These factors are divided into external (shaped outside of the committee e.g. by law) and internal ones (related to the composition of the committee and interactions between its members). The survey proves that the problems analysed in literature indeed fit the proposed framework. Moreover, it points out some of the problems which are underexplored in the existing literature and thus provides interesting suggestions for further research, both theoretical and empirical, related to the functioning of monetary policy committees.