Monetary policy decision-making when information search is costly
This paper explores monetary policy decision-making within an insurance model with expected utility-maximizing policy-makers. The authors consider that policy-makers are different in terms of their backgrounds, experience and skills and they may disagree on the appropriate policy response. In a mone...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
LLC "CPC "Business Perspectives"
2016-04-01
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| Series: | Banks and Bank Systems |
| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/7465/BBS_en_2016_01_Jung.pdf |
| _version_ | 1819083128360140800 |
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| author | Alexander Jung Francesco Paolo Mongelli |
| author_facet | Alexander Jung Francesco Paolo Mongelli |
| author_sort | Alexander Jung |
| collection | DOAJ |
| description | This paper explores monetary policy decision-making within an insurance model with expected utility-maximizing policy-makers. The authors consider that policy-makers are different in terms of their backgrounds, experience and skills and they may disagree on the appropriate policy response. In a monetary policy committee, they share information and decide on interest rates by means of an agreed voting rule. The authors show that, in the presence of risk and search costs, it would be optimal for policy-makers to fully insure against the expected loss from a potential policy error. Whether a monetary policy committee sufficiently hedges against this risk will depend on several factors such as the skills of policy-makers, the distribution of members’ beliefs, and the committee’s (statutory) voting rule, but also on other factors not captured by the model |
| first_indexed | 2024-12-21T20:27:38Z |
| format | Article |
| id | doaj.art-8b0de7fd01f74ec7852334bb85b037c0 |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-12-21T20:27:38Z |
| publishDate | 2016-04-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-8b0de7fd01f74ec7852334bb85b037c02022-12-21T18:51:20ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742016-04-01111152210.21511/bbs.11(1).2016.027465Monetary policy decision-making when information search is costlyAlexander Jung0Francesco Paolo Mongelli1Senior Economist at the European Central Bank (Germany)Senior Advisor at the European Central Bank, Honorary Professor at the Frankfurt Goethe University (Germany)This paper explores monetary policy decision-making within an insurance model with expected utility-maximizing policy-makers. The authors consider that policy-makers are different in terms of their backgrounds, experience and skills and they may disagree on the appropriate policy response. In a monetary policy committee, they share information and decide on interest rates by means of an agreed voting rule. The authors show that, in the presence of risk and search costs, it would be optimal for policy-makers to fully insure against the expected loss from a potential policy error. Whether a monetary policy committee sufficiently hedges against this risk will depend on several factors such as the skills of policy-makers, the distribution of members’ beliefs, and the committee’s (statutory) voting rule, but also on other factors not captured by the modelhttps://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/7465/BBS_en_2016_01_Jung.pdf |
| spellingShingle | Alexander Jung Francesco Paolo Mongelli Monetary policy decision-making when information search is costly Banks and Bank Systems |
| title | Monetary policy decision-making when information search is costly |
| title_full | Monetary policy decision-making when information search is costly |
| title_fullStr | Monetary policy decision-making when information search is costly |
| title_full_unstemmed | Monetary policy decision-making when information search is costly |
| title_short | Monetary policy decision-making when information search is costly |
| title_sort | monetary policy decision making when information search is costly |
| url | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/7465/BBS_en_2016_01_Jung.pdf |
| work_keys_str_mv | AT alexanderjung monetarypolicydecisionmakingwheninformationsearchiscostly AT francescopaolomongelli monetarypolicydecisionmakingwheninformationsearchiscostly |