Overconfidence, monetary policy committees and chairman dominance

Carl Claussen, Egil Matsen, Øistein Røisland and Ragnar Torvik

Journal of Economic Behavior & Organization, 2012, vol. 81, issue 2, 699-711

Abstract: Monetary policy decisions are typically characterized by three features: (i) decisions are made by a committee, (ii) the committee members often disagree, and (iii) the chairman is almost never on the losing side in the vote. We show that the combination of overconfident policymakers and a chairman with agenda-setting rights can explain all these features. The optimal agenda-setting power to the chairman is a strictly concave function of the degree of overconfidence. We also show that the quality of advice produced by the central bank staff is higher in a flat organization than in a hierarchical one.

Keywords: Central bank governance; Monetary policy committees; Overconfidence; Agenda-setting (search for similar items in EconPapers)
JEL-codes: D02 D71 E58 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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Working Paper: Overconfidence, Monetary Policy Committees and Chairman Dominance (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:81:y:2012:i:2:p:699-711

DOI: 10.1016/j.jebo.2011.12.003

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