Template-Type: ReDIF-Paper 1.0
Author-Name: Szilárd Erhart
Author-X-Name-First: Szilárd
Author-X-Name-Last: Erhart
Author-Email: erhartsz@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Jose-Luis Vasquez-Paz
Author-X-Name-First: Jose-Luis
Author-X-Name-Last: Vasquez-Paz
Author-Email:
Author-Workplace-Name: Banco Central de Reserva del Peru

Title: Optimal monetary policy committee size: Theory and cross country evidence

Abstract: Theoretical and empirical studies of different sciences suggest that an optimal committee consists of roughly 5-9 members, although it can swell mildly under specific circumstances. This paper develops a conceptual model in order to analyze the issue in case of monetary policy formulation. The optimal monetary policy committee (MPC) size varies according to the uncertainty of MPC members’ information influenced by the size of the monetary zone and overall economic stability. Our conceptual model is backed up with econometric evidence using a 2006 survey of 85 countries. The survey is available for further research and published on the web. The MPC size of large monetary zones (EMU, USA, Japan) is close to the estimated optimal level, but there exist several smaller countries with too many or too few MPC members.

Length: 32 pages
Creation-Date: 2007
File-URL: http://www.mnb.hu/letoltes/wp-2007-6.pdf
File-Format: Application/pdf

Number: 2007/6
Classification-JEL: E50, E58.
Keywords: monetary policy committe, mpc size, decision making.
Handle: RePEc:mnb:wpaper:2007/6