The Discursive Dilemma in Monetary Policy

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Working Paper series presents reports on matters in the sphere of activities of the Riksbank that are considered to be of interest to a wider public. The papers are to be regarded as reports on ongoing studies and the authors will be pleased to receive comments. Terms of use: Documents inThe views expressed in Working Papers are solely the responsibility of the authors and should not to be interpreted as reflecting the views of the Executive Board of Sveriges Riksbank. The Discursive Dilemma in Monetary PolicyCarl Andreas Claussen AbstractThe discursive dilemma implies that the policy decision of a board of policymakers depends on whether the board reaches the decision by voting directly on policy (conclusion-based procedure), or by voting on the premises for the decision (premise-based procedure). We derive results showing when the discursive dilemma may occur, both in a general model and in a standard monetary policy model. When the board aggregates by majority voting, a discursive dilemma can occur if either (i) the relationship between the premise and the decision is nonmonotonic, or (ii) if the board members have di¤erent judgments on at least two of the premises. Normatively, a premise-based procedure tends to give better decisions when there is disagreement on parameters of the model.

Explaining Interest Rate Decisions When the MPC Members Believe in Different Stories

“…Following Claussen and Røisland (2010a), we call parameters and variables in R to which members may have di¤erent judgements or estimates premise-variables. The relation between r and the premise-variables is given by a dependence function r j = D(p 1;j; p 2;j ; :::; p k;j ) j = 1; :::; n,…”

“…Literature In an earlier paper (Claussen and Røisland, 2010a) we study the quality of the policy decision under the PBP and the CBP. In this paper we ask how well the decisions can be explained to the public and study the quality of the story explaining the decision under the two decisionmaking procedures.…”

“…From this perspective, it does not matter whether a decision is reached through wrong judgments on the premises, as long as the decision itself is correct. In Claussen and Røisland (2010a), we apply an epistemic perspective, and analyze which of the two alternative decision procedures that give better monetary policy decisions in terms of the smallest means squared error for the interest rate. In the current paper we take the procedural perspective, and look at which procedure gives the best aggregate judgment on the reasons for the decision.…”

Monetary Policy Deliberations : Committee Size and Voting Rules

“…In other words, members are aware of their lack of skills and take it into account when deciding. Second, the precise modelling of the aggregation process consubstantial to the voting rule, and in particular whether members vote on their estimation of the relevant variables or directly on the policy instrument, a¤ects the outcome of the decision-making process (see Claussen and Roisland (2010)). …”

Moral Responsibility for Large-Scale Events: The Difference between Climate Change and Economic Crises

“… In another article, Claussen and Røisland (2010b) argue that this applies to monetary policy making. …”