Too Many Cooks? Committees in Monetary Policy

31 Pages Posted: 9 Apr 2008

See all articles by Helge Berger

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Volker Nitsch

Darmstadt University of Technology - Department of Law and Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Date Written: April 1, 2008

Abstract

How many people should decide about monetary policy? In this paper, we take an empirical perspective on this issue, analyzing the relationship between the number of monetary policy decision-makers and monetary policy outcomes. Using a new data set that characterizes Monetary Policy Committees (MPCs) in more than 30 countries from 1960 through 2000, we find a U-shaped relation between the membership size of MPCs and inflation; our results suggest that the lowest level of inflation is reached at MPCs with about seven to ten members. Similar results are obtained for other measures, such as inflation variability and output growth. We also find that MPC size influences the success of monetary targeting regimes. In contrast, there is no evidence that either turnover rates of MPC members or the membership composition of MPCs affect economic outcomes.

Keywords: central bank design, monetary policy committee, central bank board, central bank council, governance, inflation

JEL Classification: E52, E58, E61

Suggested Citation

Berger, Helge and Nitsch, Volker, Too Many Cooks? Committees in Monetary Policy (April 1, 2008). CESifo Working Paper Series No. 2274, Available at SSRN: https://ssrn.com/abstract=1118261

Helge Berger

Free University Berlin - Department of Economics ( email )

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Berlin 14195, 14195
Germany
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+49 30 838-52782 (Fax)

HOME PAGE: http://www.wiwiss.fu-berlin.de/berger/eng_index.htm

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

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Munich, DE-81679
Germany
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HOME PAGE: http://www.CESifo.de

Volker Nitsch (Contact Author)

Darmstadt University of Technology - Department of Law and Economics ( email )

Marktplatz 15
Residenzschloss
Darmstadt, 64283
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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