http://repub.eur.nl/res/aut/251/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/6611/ 2004-10-29T00:00:00Z Most monetary policy committees decide on interest rates using a simple majority voting rule. Given the inherent heterogeneity of committee members, this voting rule is suboptimal in terms of the quality of the interest rate decision, but popular for other (political) reasons. We show that a clustering of committee members into 2 subgroups, as is the case in a hub-and spokes systems of central banks such as the Fed or the ESCB, can eliminate this suboptimality whilst retaining the majority voting rule. http://repub.eur.nl/res/pub/6659/ 2004-03-01T00:00:00Z We develop a theoretical framework for studying the effects of interaction on the quaJity of decision-making by monetary policy committees. We show that interaction, i.e. increasing one's expertise through an exchange of views, is most likely not to result in interdependent voting behaviour.Therefore, and in contrast to earlier literature, we find that interaction is beneficial for the collective outcome. http://repub.eur.nl/res/pub/840/ 2003-09-08T00:00:00Z This paper deals with the use of the yield curve in monetary policy making. We argue that the yield curve's information content with respect to future inflation and real economic activity depends on correct identification of both the nature of shocks to the economic system and price behaviour. Identification is crucial, as there are alternative interpretations of an observed movement in the yield curve suggesting different monetary policy reactions. We show that identification on the basis of estimated equations may be problematic, using an empirical experiment in which a simple term structure model is applied to data on a large number of countries. This is especially relevant for the Eurosystem, as some evidence emerges for Lucas (1976)-type problems in our simple yield curve model. This finding questions the yield curve?s usefulness for policy evaluation in the early years of Stage Three. All in all, policy analysts should be cautious when using the yield curve as information variable for monetary policy. http://repub.eur.nl/res/pub/6706/ 2003-07-07T00:00:00Z We investigate the implications for the setting of interest rates when monetary policy decisions are taken by a committee, in which a subset of members may meet prior to the voting in the committee and therefore has the possibility to reach consensus ex ante to vote unanimously ex post. We allow for different committee sizes, various voting rules and differences in skills among committee members. We find that the size of the committee is much less important in deter- mining the degree of interest rate inertia than the skills of committee members. Moreover, prior interaction of a subgroup only has a minor effect on the setting of interest rates by the committee, provided that members on average are equally skilled and voting takes place using a simple majority rule. If either of those assumptions are relaxed, prior interaction has substantial effects on the setting of interest rates. In addition, prior interaction increases the optimal size of the Committee, ceteris paribus. http://repub.eur.nl/res/pub/6800/ 2002-08-01T00:00:00Z Using a New-Keynesian framework, we investigate how far the inflationary processes in member states of EMU cause regional price levels to converge. We fail to produce hard evidence of the present existence of such an adjustment mechanism, notwithstanding that inflation in some countries tends to converge towards the euro area level. Overa11, inflation persistence has declined significantly over the years, but there are still marked differences between countries on this score. We conclude that the euro area is not an optimal currency area yet, lending support to the quest for further structura1 reforms in European labour and product markets. http://repub.eur.nl/res/pub/21533/ 2001-07-01T00:00:00Z An empirical investigation of the term structure (the relation of the long interest rate to the short interest rate) showed structural change as the deadline for the euro became closer. Our empirical analysis of the term structures (yield curves) in 12 OECD countries uncovers that econometrically estimated behavioural equations for most EMU countries were stable even in the light of the creation of the euro. This finding would seem to defy the Lucas Critique. However, the significant structural instability found for the euro area's core country Germany suggests that the Lucas Critique is relevant in the analysis of the impact of the creation (and future extensions) of EMU.