How committees reduce the volatility of policy rates
Etienne Farvaque (),
Norimichi Matsueda () and
Pierre-Guillaume Méon ()
No 07-11.RS, DULBEA Working Papers from ULB -- Universite Libre de Bruxelles
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 e¤ect. However, members of a monetary union are better off under symmetric rules (voting, consensus, 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)
Pages: 42 p.
New Economics Papers: this item is included in nep-cba, nep-cdm, nep-mac, nep-mon and nep-pol
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Published by: DULBEA - Université libre de Bruxelles, Bruxelles
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