How monetary policy committees impact the volatility of policy rates

Etienne Farvaque, Norimichi Matsueda and Pierre-Guillaume Méon

Journal of Macroeconomics, 2009, vol. 31, issue 4, 534-546

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)
Date: 2009
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:31:y:2009:i:4:p:534-546

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