E C B • W o r k i n g P a p e r N o 2 5 6 • S e p t e m b e r 2 0 0 3Abstract This is a survey on the recent game theoretic literature on committee decision making. We consider theoretical work on the role of (i) strategic voting, (ii) costly information acquisition, (iii) con°icting interests, and (iv) communication in committees. Moreover, we review recent experimental evidence on these issues. Our analysis focuses on the optimal size, composition, and decision rules of committees.We discuss implications for the design of monetary policy committees.Keywords: committees, strategic voting, costly information acquisition, monetary policy committees.JEL N.: D71, E52. E C B • W o r k i n g P a p e r N o 2 5 6 • S e p t e m b e r 2 0 0 3 Non technical summaryThis is a survey on the recent game theoretic literature on committee decision making. This literature has studied rational voter behavior when (i) committee members do not always reveal their signal about the true state of the world, (ii) committee members obtain their signal at positive costs, (iii) committee members may have di®erent objectives and (iv) committee members may exchange views before voting.These insights are used to give advice on optimal committee design.The main¯ndings of this literature can be summarized as follows:1. When information acquisition is costly, the optimal committee size is¯nite. Larger committees yield little incentives for individual information acquisitionand may lead to less informed decisions. The optimal number of committee members is nonincreasing in information acquisition costs and ceteris paribus larger if (i) the costs of type I and type II errors are more similar, (ii) the prior is more di®use and (iii) the signal is less accurate.2. Even with con°icting interests delegation to one single member may be Pareto dominated by committee decision-making. When the committee rule is chosen appropriately, gains from sharing information outweigh distortions from information manipulation regardless of the extent of con°icts in the committee. The reason is that committee procedures are themselves chosen to control strategic misrepresentation given self-interested behavior.3. The optimal committee size is always smaller than the¯rst best level when there are con°icting interests. The reason is that noisy reports by committee members with policy biases are not as informative as if there were no incentives to distort information. E C B • W o r k i n g P a p e r N o 2 6 • S e p t e m b e r 2 0 0 3erences. Increasing con°icts of interest lead to stronger incentives for strategic manipulation of private information.5. Total social surplus may instead increase in preference heterogeneity when moral hazard problems in information gathering severely limit the feasible committee size.6. The decision rule has to be adapted to the speci¯c problem at hand. The majority rule has to be adjusted to the distribution of signals and the initial prior 8. Granting a committee independence may enhance the quality of its research.Incentives for informa...

Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960-2011, we identify, document, and compare the macroeconomic dynamics of credit booms across low-and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macroeconomic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.

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This paper identifies leading indicators of fiscal crises based on a large sample of countries at different stages of development over 1970-2015. Our results are robust to different methodologies and sample periods. Previous literature on early warning sistems (EWS) for fiscal crises is scarce and based on small samples of advanced and emerging markets, raising doubts about the robustness of the results. Using a larger sample, our analysis shows that both nonfiscal (external and internal imbalances) and fiscal variables help predict crises among advanced and emerging economies. Our models performed well in out-of-sample forecasting and in predicting the most recent crises, a weakness of EWS in general. We also build EWS for low income countries, which had been overlooked in the literature.

A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, there is very limited analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly ignored in the past. Countries faced on average two crises since 1970, with the highest frequency in LIDCs and lowest in advanced economies. The data sheds some light on policies and economic dynamics around crises. LIDCs, which are usually seen as more vulnerable to shocks, appear to suffer the least in crisis periods. Surprisingly, advanced economies face greater turbulence (growth declines sharply in the first two years of the crisis), with half of them experiencing economic contractions. Fiscal policy is usually procyclical as countries curtail expenditure growth when economic activity weakens. We also find that the decline in economic growth is magnified if accompanied by a financial crisis.