Old vs Young members of Central bank’s MPC

Maral Shamloo of IMF has written an interesting paper. Shamloo models how monetary policy committee delivers on its objective with older and younger generation of MPC members:

In this paper I study the effect of imperfect central bank commitment on inflationary outcomes. I present a model in which the monetary authority is a committee that consists of members who serve overlapping, finite terms.

Older and younger generations of Monetary Policy Committee (MPC) members decide on policy by engaging in a bargaining process. I show that this setup gives rise to a continuous measure of the degree of monetary authority’s commitment. The model suggests that the lower the churning rate or the longer the tenure time, the closer social welfare will be to that under optimal commitment policy.

Hmmm….very intresting idea and equally interesting findings.  It says older MPC members give better overall results. You come across many papers on monetary policy committee thanks to Alan Blinder. But they are mostly on the lines of how it is organised, how decisions are taken etc. This paper takes a step forward and looks at the age profiles in the MPC.  

Though, much of the paper is technical and based on a model. It would be interesting to put these findings with real examples – modelling young and old generation MPC members at say Fed, Bank of England, Riksbank, ECB etc.

It is amazing to see

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