Collective versus individual Decision-Making: A case study of the Bank of Israel Law

The new Bank of Israel Law of 2010 changed monetary policy decision-making at the Bank of Israel from a setup where decisions are taken by the governor to one where decisions are taken by a committee of voting members. We use this institutional change as a natural experiment to compare individual versus collective decision-making. Empirical results show different dynamics for interest rate decisions across the two regimes and support the view that the status quo bias is larger when decisions are taken by a committee than when they are taken by a single individual.