How monetary policy committees impact the volatility of policy rates

Etienne Farvaque (), Norimichi Matsueda () and Pierre-Guillaume Méon

No 08-026.RS, Working Papers CEB from Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB)

Abstract: This paper relates the volatility of interest rates to the collective nature of monetary policymaking in monetary unions. Several decision rules are modelled, including hegemonic and democratic procedures, and also committees headed by a chairman. A ranking of decision rules in terms of the volatility of policy rates is obtained, showing that the presence of a chairman has a cooling effect. However, members of a monetary union are better off under symmetric rules (voting, averaging, bargaining), unless they themselves chair the union. The results are robust to the inclusion of heterogeneities among members of the monetary union.

Keywords: Monetary Policy Committees; Decision Procedures; Interest-rate; Monetary Union (search for similar items in EconPapers)
JEL-codes: D70 E43 E58 F33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cdm, nep-mac and nep-mon
Date: 2008-09
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http://www.solvay.edu/EN/Research/Bernheim/documents/wp08026.pdf First version, 2008 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:sol:wpaper:08-026

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