Suppose the central bank in your country has stability of the GDP growth rate as its primary goal. Faced with a choice of having monetary policy decisions made by a well-qualified individual with an extremely strong dislike of volatile GDP growth or a committee of equally well-qualified people with a wide range of views, which choice would you recommend?

Question

Business

Carlo Osborn

13 November, 19:30

Suppose the central bank in your country has stability of the GDP growth rate as its primary goal. Faced with a choice of having monetary policy decisions made by a well-qualified individual with an extremely strong dislike of volatile GDP growth or a committee of equally well-qualified people with a wide range of views, which choice would you recommend?

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Answers (1)

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Will Griffith · Answer 1

a committee of equally well-qualified people with a wide range of views

Explanation:

The central function of the central bank's monetary policy is to keep inflation under control. If this happens, it is possible that the Central Bank will use monetary policy in a second moment to stimulate economic activity and GDP. In this context, I would strongly recommend that the monetary policy decision be taken by a technical collegiate with different perspectives. This choice is justified by the great importance of monetary policy for the financial system and consequently for society as a whole, since if an inappropriate monetary policy is adopted, the consequences can be severe, such as inflationary processes and exchange rate volatility.