Designing Monetary Policy Committees

Volker Hahn

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We integrate monetary policy-making by committee into a New Keynesian model to assess the consequences of the committee's institutional characteristics for inflation, output, and welfare. Our analysis delivers the following results. First, we demonstrate that transparency about the committee's future composition may be harmful. Second, we show that longer terms for central bankers lead to more effective output stabilization at the expense of higher inflation variability. Third, larger committees allow for more efficient stabilization of inflation but for less efficient output stabilization. Fourth, large committees and short terms are therefore socially desirable if the weight on output stabilization in the social loss function is low. Fifth, we show that a central banker with random preferences may be preferable to a central banker who shares the preferences of society.

JEL-codes: D71 E52 E58 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Designing monetary policy committees (2016)
Working Paper: Designing Monetary Policy Committees (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112811

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