monetary policy

This paper explores an optimal personnel organization problem of monetary policycommittees. First, I construct an analytically tractable model for monetary policyanalysis which starts from decision-making in the monetary policy committee.Using the model, I investigate the relationship between preference heterogeneityamong the committee members and the optimal structure of the monetary policycommittee. The result shows that it is optimal in general cases to appoint notonly inflation-minded (hawkish) persons but also output-minded (dovish) persons.This is a theoretical justification for the fact that the actual monetary policy committees(e.g., MPC of Bank of England and FOMC) usually consist of both typemembers as the empirical researches suggest. It also explains why the committeeshave replaced the single policy makers in the actual central banks.

monetary policy