Deliberation and Learning in Monetary Policy Committees

By Chappell, Henry W., Jr.; McGregor, Rob Roy et al. | Economic Inquiry, July 2012 | Go to article overview

Deliberation and Learning in Monetary Policy Committees


Chappell, Henry W., Jr., McGregor, Rob Roy, Vermilyea, Todd A., Economic Inquiry


I. INTRODUCTION

Recent theoretical and experimental work on the monetary policy decision process supports the argument that committees may make better policy decisions than individuals (e.g., Blinder 2007; Blinder and Morgan 2005; Gerlach-Kristen 2006; Lombardelli, Proudman, and Talbot 2005). Blinder (2004, 38-39) offers four reasons why monetary policy committees (MPCs) might make better choices than individuals. First, when members have different preferences, diversification avoids extreme outcomes. Second, even if members have similar preferences, they might use different models to reach their conclusions. Third, members might use different forecasts or forecasting techniques. Finally, individuals might use different modes of reasoning--or "heuristics"--to approach problems. The last three reasons in

Blinder's list suggest that members bring distinct perspectives or information to a committee meeting. Deliberation in the committee meeting requires members to confront their differences and could result in both learning and better policy decisions.

Former Bank of England MPC member Richard Lambert (2005) and former Federal Reserve Bank of Boston President Cathy Minehan (2006) have pointed to the importance of deliberation in MPC meetings. Particularly revealing are Minehan's (2006) comments about her experience on the Federal Open Market Committee (FOMC):

   One highly important element in dealing with uncertainty is the
   strength of the committee itself In that regard, it is perhaps
   fashionable to deride committee decision making in general as
   bureaucratic and cumbersome. My view is that in situations where
   there are many possible philosophical approaches and a lot at
   stake, a committee helps its members to both see all aspects of the
   issue, and weigh the risks and costs of a particular decision. As
   with other vital institutions, like the Supreme Court, there is
   value to a committee decision on policy versus one taken by a
   single executive.

The importance of deliberation in various decision-making contexts has also been addressed in political science. Austen-Smith and Feddersen (2006) contribute to the literature on jury deliberation by offering a theoretical analysis of how different voting rules shape voters' incentives to share information prior to a vote being taken. Barabas (2004) finds evidence that deliberation is an effective way to disseminate information and shape opinions about public policy issues. U.S. Supreme Court Justice Stephen Breyer has explained how deliberation matters in Supreme Court conferences (cited in Brafman and Brafman 2009, Kindle Location 1764):

"If someone is going to write a dissent ... they have a point, they have some kind of point they're trying to make. Quite often the opinion [of the majority] is changed somewhat in response to comments and opinions [of the dissenters]. Occasionally--maybe once or twice a year--the whole Court shifts."

Even when dissenters do not have enough votes to change the Court's opinion, they still affect the process. "It makes the other person take account of the point. They have to answer it or they have to take it into account," Breyer said.

In the case of the FOMC, Bailey and Schonhardt-Bailey (2008) use a full-text content analysis of the 1979 and 1980 FOMC transcripts to study the importance of deliberation in the decision to shift to anti-inflationary policy under Chairman Paul Volcker. They conclude that "deliberation in the FOMC did indeed 'matter' both in 1979 and 1980" (p. 404) as Volcker led his colleagues to adopt a new operating procedure and maintain a more restrictive monetary policy stance. Bailey and Schonhardt-Bailey (2009) extend their analysis to the 1979-1999 period and find that the role of deliberation declined from the Volcker era to the Greenspan era; Woolley and Gardner (2009) concur with this result. Even in light of previous theoretical and empirical work on deliberation, though, Bailey and Schonhardt-Bailey (2009, 22) nevertheless argue that "too little attention has been given to understanding the process of deliberation in policymaking and how this yields outcomes (decisions) and the quality of those outcomes.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Deliberation and Learning in Monetary Policy Committees
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.