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On the Design of Monetary Policy Committees

Author

Listed:
  • Alan S. Blinder

    (Princeton University)

Abstract
As the opening speaker, I may perhaps be permitted a short trip down memory lane. The trip is purposeful, and it will be mercifully short. While preparing my Marshall Lectures for delivery at Cambridge in 1995, I asked the Federal Reserve staff, for I was then Vice Chairman, to research what had been written about monetary policymaking by committees -- as opposed to by individuals. Although they were (and remain) a knowledgeable and thorough bunch, they unearthed almost nothing. So when I subsequently delivered the Robbins Lectures at the London School of Economics the following year, this is what I concluded on the subject: My own hunch is that, on balance, the additional monetary policy inertia imparted by group decisionmaking provides a net benefit to society. But my main point is simpler: My experience as a member of the FOMC left me with a strong feeling that the theoretical fiction that monetary policy is made by a single individual maximizing a well-defined preference function misses something important. In my view, monetary theorists should start paying some attention to the nature of decisionmaking by committee, which is rarely mentioned in the academic literature. (Blinder, 1998, p. 22)

Suggested Citation

  • Alan S. Blinder, 2007. "On the Design of Monetary Policy Committees," Working Papers 1030, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:153
    as

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    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/153blinder.pdf
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    References listed on IDEAS

    as
    1. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    2. Waller, Christopher J., 1992. "A bargaining model of partisan appointments to the central bank," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 411-428, June.
    3. Blinder, Alan S., 2007. "Monetary policy by committee: Why and how?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 106-123, March.
    4. Faust, Jon, 1996. "Whom can we trust to run the Fed? Theoretical support for the founders' views," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 267-283, April.
    5. Anne Sibert, 2006. "Central Banking by Committee," International Finance, Wiley Blackwell, vol. 9(2), pages 145-168, August.
    6. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, vol. 24(4), pages 817-832, December.
    7. Alan S. Blinder & John Morgan, 2008. "Leadership in Groups: A Monetary Policy Experiment," International Journal of Central Banking, International Journal of Central Banking, vol. 4(4), pages 117-150, December.
    8. Szilárd Erhart & Jose-Luis Vasquez-Paz, 2007. "Optimal monetary policy committee size: Theory and cross country evidence," MNB Working Papers 2007/6, Magyar Nemzeti Bank (Central Bank of Hungary).
    9. Clare Lombardelli & James Proudman & James Talbot, 2005. "Committees Versus Individuals: An Experimental Analysis of Monetary Policy Decision-Making," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. Christian Aubin & Ibrahima Diouf & Dominique Pepin, 2010. "Inertie De La Politique Monétaire Dans La Zone Euro : Le Rôle De L'Hétérogénéité," Post-Print hal-00960030, HAL.
    3. Bodea, Cristina & Kerner, Andrew, 2022. "Fear of inflation and gender representation in central banking," European Journal of Political Economy, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    monetary policy;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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