Kiel Working Papers, Kiel Institute for World Economics
No 1377:
Monetary Policy Committee Size and Inflation Volatility
Szilárd Erhart, Harmen Lehment and Jose L. Vasquez Paz
Abstract: Previous research on the optimal size of a monetary policy
committee (MPC) focused on theoretical analyses and experimental studies.
These studies suggest that the ideal monetary policy committee may not have
many more than five members. In this paper we conduct an empirical
cross-country study to explore whether there is a link between the size of
an MPC and inflation volatility. The analysis for 75 countries which have
adopted MPCs provides some support for the above suggestion: countries with
less than five MPC members tend to have larger deviations from trend
inflation than MPCs with five members; raising the number of MPC members
above five does not contribute to a further reduction in volatility.
Keywords: Monetary Policy Committee; Inflation Volatility; (follow links to similar papers)
JEL-Codes: E31,; E42,; E58; (follow links to similar papers)
12 pages, September 2007
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