Committee structure and its implications for monetary policy decision-making

We investigate the implications for the setting of interest rates when monetary policy decisions are taken by a committee, in which a subset of membersmay meet prior to the voting in the committee and therefore has the possibility to reach consensus ex ante to vote unanimously ex post. We allow fordifferent committee sizes, various voting rules anddifferences in skills among committee members. We find that the size of the committee is much less important in determining the degree of interest rateinertia than the skills of committee members. Moreover, prior interaction of a subgroup only has a minor effect on the setting of interest rates by thecommittee, provided that members on average areequally skilled and voting takes place using a simple majority rule. If either of these assumptions are relaxed, prior interaction has substantialeffects on the setting of interest rates.