Equilibrium Inflation as Determined by a Policy Committee

Cothren, Richard

doi:10.2307/1885124

Cited by 8 publications

(5 citation statements)

References 6 publications

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“…Svensson [1995] argues that the Swedish Riksbank's appointment structure creates monetary uncertainty rather than resolving it. Many authors have studied how policy boards affect the setting of policy [Tabellini 1987;Cothren 1988;Waller 1989;Lohmann 1997;Garcia de Paso 1995;Faust 1996;Bullard and Waller 1998], but none of those models explicitly model the appointment process or do so in a very naïve manner. Furthermore, there is a developing empirical literature in political science that examines how appointments affect the direction of policy.…”

Section: Introductionmentioning

confidence: 99%

Policy Boards and Policy Smoothing*

Waller

2000

Quarterly Journal of Economics

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Partisan politics and random election outcomes generate policy uncertainty and partisan business cycles. To reduce policy uncertainty, society must design the policy-making environment to overcome electoral uncertainty and partisanship. I show that delegating policy to an independent policy board with discretionary powers will produce substantial policy smoothing and lower policy uncertainty relative to a simple model in which elected officials set policy. Board members are chosen in a partisan, noncooperative environment; yet in the benchmark model, policy variability is eliminated, and the cooperative bargaining solution is replicated.

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Section: Introductionmentioning

confidence: 99%

Policy Boards and Policy Smoothing*

Waller

2000

Quarterly Journal of Economics

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“…More precisely, we ran a Monte Carlo experiment to investigate the stochastic properties of i t , y t , π t , and G t . We first assumed that the chairman was a nationalist and that her favorite interest rate was given by (9). Second, we assumed that the chairman acted in a federalist way.…”

Section: Outcomes With Chairmenmentioning

confidence: 99%

“…A few contributions have thus studied the consequences of committees on monetary policy, and on the volatility of policy rates. This is the case of Cothren (1988), Sibert (2003), and Fatum (2006), who focus on the impact of monetary policy committees on their institution's reputation building and on the level of inflation. Gerlach-Kristen (2006) also underlines that committees are an efficient way to deal with monetary uncertainty about the economy, while Waller (2002) stresses that monetary policy committees are a way to cope with political uncertainty.…”

Section: Introductionmentioning

confidence: 99%

How monetary policy committees impact the volatility of policy rates

Farvaque

Matsueda

Méon³

2009

Journal of Macroeconomics

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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 effect. However, members of a monetary union are better off under symmetric rules (voting, averaging, bargaining), unless they themselves chair the union. The results are robust to the inclusion of heterogeneities among members of the monetary union. How monetary policy committees impact the volatility of policy ratesEtienne Farvaque * Norimichi Matsueda † Pierre-Guillaume Méon ‡ § Abstract 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 effect. However, members of a monetary union are better off under symmetric rules (voting, averaging, bargaining), unless they themselves chair the union. The results are robust to the inclusion of heterogeneities among members of the monetary union.

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“…Our paper contributes to an emerging range of theoretical literature on monetary policy committees 4 . Early contributions were Cothren (1988) and Waller (1989), who considered the dynamics of policy in the light of staggered terms. Waller and Walsh (1996) provide a comprehensive account of how central bank independence can be characterized in terms of competitiveness, partisanship, and term length.…”

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confidence: 99%

Voting Transparency in a Monetary Union

Gersbach¹,

Hahn²

2009

J of Money Credit Banking

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We examine whether the monetary policy committee of a monetary union should publish its voting records when members are appointed by national politicians. We show that the publication of voting records lowers overall welfare. This finding also holds for arbitrary levels of private benefits from holding office and if governments incur costs when replacing committee members. High private benefits of committee members always lower overall welfare, as they induce nonpartisan members to care more about being reappointed than about beneficial policy outcomes. Nonrenewable but long terms for national committee members and delegating the appointment of all committee members to a union-wide authority would be desirable. Copyright (c) 2009 The Ohio State University.

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Equilibrium Inflation as Determined by a Policy Committee

Cited by 8 publications

References 6 publications

Policy Boards and Policy Smoothing*

Policy Boards and Policy Smoothing*

How monetary policy committees impact the volatility of policy rates

Voting Transparency in a Monetary Union

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