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The Quiet RevolutionCentral Banking Goes Modern$
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Alan Blinder

Print publication date: 2004

Print ISBN-13: 9780300100877

Published to Yale Scholarship Online: October 2013

DOI: 10.12987/yale/9780300100877.001.0001

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Ex Uno Plures: Central Banking by Committee

Ex Uno Plures: Central Banking by Committee

(p.34) Chapter 2 Ex Uno Plures: Central Banking by Committee
The Quiet Revolution

Alan S. Blinder

Yale University Press

This chapter focuses on whether monetary policy decisions are best made by an individual or by a committee. In the real world, there has been a clear trend in the way central banks organize themselves to conduct monetary policy: the one-man rule used to be the norm, but today most central banks make decisions by committee. This trend is probably due to the perceived success of the Fed and the Bundesbank. However, there are also several sound theoretical reasons, backed up by some supporting evidence, to favor a monetary policy committee over an individual governor. The chapter argues that most of these reasons come down, in one way or another, to diversification of risk. A multimember committee pools preferences, models, forecasts, and much else—thereby reducing the risk that a dictatorial central bank governor might lead the bank astray.

Keywords:   decision making, committee, monetary policy, group decision making, individual decision making

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