Overconfidence, monetary policy committees and chairman dominance

Abstract

Monetary policy decisions are typically characterized by three features: (i) decisions are made by a committee, (ii) the committee members often disagree, and (iii) the chairman is almost never on the losing side in the vote. We show that the combination of overcon…dent policymakers and a chairman with agenda-setting rights can explain all these features. The optimal agenda-setting power to the chairman is a strictly concave function of the degree of overcon…dence. We also show that the quality of advice produced by the central bank sta¤ is higher in a ‡at organization than in a hierarchical one.

Stock Price Reactions to Wire News from the European Central Bank: Evidence from Changes in the Sentiment Tone and International Market Indexes

“…study the extent of herding behaviour in FOMC member forecasts regarding growth, inflation and unemployment and find no evidence of herding behaviour. These findings support the view that forecasts signal FOMC members' policy preferences Claussen et al (2012). emphasize the role of psychological factors, such as overconfidence, in monetary policy making.…”

Establishing a hawkish reputation: interest rate setting by newly appointed central bank governors

“…For instance, Blinder (2007) concludes that Alan Greenspan was influential enough to almost always impose his view on the Federal Open Market Committee. Although it is doubtful that the governor has complete discretion in setting the interest rate all the time, she/he is almost never outvoted in monetary policy decisions (Claussen et al, 2012). This implies that the governor should have at least some agenda setting power when it comes to a vote in the monetary policy committee.…”

Narcissism in Iranian auditing profession

“…Their results confirmed that men were overconfident compared with women. Claussen et al (2012) studied overconfidence between decision makers involved in monetary policy decisions. They prepared a theory on the decision structure in modern central banks.…”