Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 240: The Discursive Dilemma in Monetary Policy

Carl Andreas Claussen () and Øistein Røisland ()
Additional contact information
Carl Andreas Claussen: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Øistein Røisland: Monetary Policy Department, Postal: Norges Bank (Central Bank of Norway) , Bankplassen 2 , P.O.Box 1179 Sentrum , 0107 Oslo, Norway

Abstract: The 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 non- monotonic, 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.

Keywords: Discursive dilemma; Monetary policy; MPC; Policy boards

JEL-codes: D71; E52; E58

37 pages, April 1, 2010

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