Revealing monetary policy preferences

Peer-reviewed working paper about an application of 1000minds:

C Smith (2009), “Revealing monetary policy preferences”, Reserve Bank of New Zealand Discussion Paper Series DP2009/01

Abstract*

This paper uses multiple criteria decision making, also termed conjoint analysis, to reveal the preferences of central bank policy-makers at the Reserve Bank of New Zealand. Guided by the Policy Targets Agreement between the Governor of the Reserve Bank and the Minister of Finance, we identify policy-makers’ willingness to trade off inflation outcomes for reductions in volatility in GDP, the exchange rate, and interest rates. Using 1000minds software, policy-makers are presented with a sequence of pairwise choices that ultimately quantify which macroeconomic attributes are most important to them. The paper also distinguishes between the preferences of senior management, and a broader cross-section of economists and other staff.

* Reproduced from the working paper.