On the Optimality of Decisions

Jan Marc Berk () and Beata Bierut ()
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Jan Marc Berk: De Nederlandsche Bank
Beata Bierut: Faculty of Economics, Erasmus Universiteit Rotterdam

No 04-120/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Most monetary policy committees decide on interest rates using a simple majority voting rule. Given the inherent heterogeneity of committee members, this voting rule is suboptimal in terms of the quality of the interest rate decision, but popular for other (political) reasons. We show that a clustering of committee members into 2 subgroups, as is the case in a hub-and spokes systems of central banks such as the Fed or the ESCB, can eliminate this suboptimality whilst retaining the majority voting rule.

Keywords: central banks' policies; decision-making under uncertainty; committees; decision-making processes (search for similar items in EconPapers)
JEL-codes: D71 D78 E58 (search for similar items in EconPapers)
Date: 2004-11-09
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20040120

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