Determinants of the size of a monetary policy committee: theory and cross-sectional evidence

Various theoretical and empirical studies, from the perspective of different disciplines, suggest that an optimal working group should have between 5 and 9 members, although this number may vary under different circumstances and is influenced by factors specific to the environment in which the group operates. This paper presents a model that analyzes the size of the monetary policy committees (MPCs) of 85 central banks based on the factors commonly cited or predicted in the literature as determinants of a committee’s optimal size. The results suggest that the number of MPC members depends on the size of the monetary area under the central bank’s jurisdiction, the characteristics specific to each central bank, and various variables associated with the country’s macroeconomic stability. The size of MPCs in large monetary areas (the European Union, the United States, and Japan) appears to be close to its “optimal” level, but there are many small countries whose MPCs deviate from that level. (Audio: Department of Economic Publications)