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Voting in Central Banks: Theory versus Stylized Facts

Author

Listed:
  • Horváth Roman

    (Institute of Economic Studies, Charles University, Opletalova 26, 11000, Prague, Czech Republic)

  • Šmídková Kateřina

    (We dedicate this paper to our co-author Kateřina, who passed away on April 29, 2014. We will miss more than a co-author)

  • Zápal Jan

    (IAE-CSIC and Barcelona GSE, Campus UAB, Bellaterra, Barcelona 08193, Spain; CERGE-EI, a joint workplace of Charles University in Prague and the Economics Institute of the Czech Academy of Sciences, Politickych veznu 7, 111 21 Prague, Czech Republic)

Abstract
The paper examines the ability of several alternative group decision-making models to generate proposing, voting and decision patterns matching those observed in the Bank of England’s Monetary Policy Committee and the US Federal Reserve’s Federal Open Market Committee. A decision-making procedure, common to all the models, is to vote between adoption of the chairman’s proposal and retention of the status-quo policy, with heterogeneous votes generated by private information of the models’ monetary policy committee members. The members can additionally express reservations regarding the final committee decision. The three alternative models differ in the degree of informational influence between the chairman and the remaining members. We find that a “supermajoritarian” model, in which the chairman proposes a policy she knows would be accepted by a supermajority of the committee members, combined with allowance for reservations, closely replicates real-world decision-making patterns. The model predicts no rejections of chairman’s proposals, low but non-trivial dissent, even during meetings where the chairman proposes no change in policy, and predictive power of the voting record of the whole committee regarding future monetary policy changes.

Suggested Citation

  • Horváth Roman & Šmídková Kateřina & Zápal Jan, 2016. "Voting in Central Banks: Theory versus Stylized Facts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-62, October.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:4:p:62:n:12
    DOI: 10.1515/bejeap-2015-0227
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    References listed on IDEAS

    as
    1. Petra Gerlach-Kristen, 2008. "The Role of the Chairman in Setting Monetary Policy: Individualistic vs. Autocratically Collegial MPCs," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 119-143, September.
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    3. 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.
    4. 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.
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    7. Roman Horváth & Katerina Šmídková & Jan Zápal, 2012. "Central Banks' Voting Records and Future Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 1-19, December.
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    11. Claussen, Carl Andreas & Matsen, Egil & Røisland, Øistein & Torvik, Ragnar, 2012. "Overconfidence, monetary policy committees and chairman dominance," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 699-711.
    12. Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2005. "Committee Decisions on Monetary Policy: Evidence from Historical Records of the Federal Open Market Committee," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033305, April.
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    Cited by:

    1. Bennani, Hamza & Fanta, Nicolas & Gertler, Pavel & Horvath, Roman, 2020. "Does central bank communication signal future monetary policy in a (post)-crisis era? The case of the ECB," Journal of International Money and Finance, Elsevier, vol. 104(C).

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    More about this item

    Keywords

    monetary policy; voting record; collective decision-making;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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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