Explaining interest rate decisions when the MPC members believe in different stories

Carl Claussen and Øistein Røisland
Additional contact information
Øistein Røisland: Norges Bank (Central Bank of Norway)

No 2013/07, Working Paper from Norges Bank

Abstract: Modern central banks do not only announce the interest rate decision, they also communicate a "story" that explains why they reached the particular decision. When decisions are made by a committee, it could be difficult to find a story that is both consistent with the decision and representative for the committee. Two alternatives that give a unique and consistent story are: (i) vote on the interest rate and let the winner decide the story, (ii) vote on the elements of the story and let the interest rate follow from the story. The two procedures tend to give different interest rate decisions and different stories due to an aggregation inconsistency called the "discursive dilemma". We investigate the quality of the stories under the two approaches, and find that alternative (ii) gives stories that tend to be closer to the true (but unobservable) story. Thus, our results give an argument in favour of premise-based, as opposed to conclusion-based, decisionmaking.

Keywords: Monetary policy committees; Communication; Judgment aggregation; Discursive dilemma (search for similar items in EconPapers)
JEL-codes: D71 E52 E58 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-02-08
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.norges-bank.no/en/news-events/news-pub ... pers/2013/WP-201307/

Related works:
Journal Article: Explaining Interest Rate Decisions when the MPC Members Believe in Different Stories (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2013_07

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().