Monetary policy committees and interest rate setting

This paper shows that it is preferable for monetary policy to be conducted by a committee instead of a single policy maker if there is uncertainty about potential output. We examine three decision procedures - an optimal procedure, averaging and voting - and find that the latter is the appropriate way to reach decisions if policy makers are not equally skilled. Finally, we demonstrate that efficient decision procedures reduce the persistence of shocks. (c) 2004 Elsevier B.V. All rights reserved.