Monetary policy by committee: Why and how?

Abstract

Monetary policy committees can reach decisions either individualistically (i.e., through voting) or collegially. Committees are neither inherently more nor less transparent than individuals. Most of the advantages of group (over individual) decision-making point to the superiority of genuinely collegial or individualistic committees. One potential disadvantage of an individualistic committee, however, is that it may confuse outside observers by speaking with too many voices. The best ways of communicating with markets and the general public differ between individual central bank governors acting alone and policy committees, and across different types of committees. When it comes to transparency, one size does not fit all. © 2006 Elsevier B.V. All rights reserved.