The Monetary Policy Committee and the Incentive Problem: A Selective Survey

This paper strives to answer five questions. First, why do legislators choose to create an independent central bank? Second, why do legislators delegate the conduct of monetary policy to a committee, rather than to a central bank governor? Third, what kinds of factors are crucial in limiting the size of the committee? Fourth, should the committee disclose individual members' voting records in addition to their policy decisions? Fifth, to what extent do current committee members constrain the decisions of future committee members? A selective review of the relevant economic literature suggests the conclusion that there is reasonable consensus on the first and second questions. The remaining three questions are still unresolved.