policy decisions it is a dominant practice among central banks to have a committee make monetary policy decisions. traditional economics literature often mentions a few reasons why groups make better monetary policy decisions than individuals. 10 one argument is that the amount of information available increases when more people participate. another is that an average of several people ’ s decisions tends to be better than a single person ’ s decision. finally, decisions tend to be less extreme if they are taken by several people. one question to ask is why there are five members of the executive board and not more or fewer. as you may know, the new riksbank act that entered into force at the beginning of 2023 reduced the number from six to five. the inquiry into a new riksbank act discussed this issue11, referring to research indicating that group decision - making seems to work best when there are about five people involved. in a balanced assessment, the inquiry proposed a reduction from six to five members. however, the social psychology literature has also shown several pitfalls to be aware of when making decisions in groups. 12 and they can apply to monetary policy decisions within a committee as well. 13 let ’ s say a committee is faced with a choice between two monetary policy options : keeping the policy rate unchanged or cutting it by 0. 25 percentage points. if one member leans towards the option of cutting the policy rate by 0. 25 percentage points, but all other members prefer an unchanged rate, conformity may cause the member to also vote in favour of an unchanged rate – against their own convictions. groupthink could arise from the committee becoming very close - knit, ignoring dissenting views both inside and outside the central bank. to reduce the risk of groupthink in the monetary policy decision - making process, it is important that members of the policy committee have different backgrounds and experiences. members should be able to express differing opinions, and discussions should be characterised by respect and willingness to listen to others. 10 see for example blinder ( 2007 ) and rieder ( 2022 ). 11 see sou 2019 : 46. 12 see, for example, breman and lagerwall ( 2024 ) for a discussion. 13 see sibert ( 2005 ). 5 speech the possibility to enter a reservation against majority decisions is key. it is an important mechanism to encourage constructive discussion in committees. in recent years, the debate on social psychology aspects of monetary policy decisionmaking has gained renewed momentum, partly as a result of the high and

and the nominal target returns of market participants. this – in combination with an ample range of investment possibilities – might trigger a “ search for yield process ” : market participants invest in riskier assets in order to achieve satisfying returns. finally, the third dimension of the risk - taking channel links the communication of monetary policy to higher risk - taking. this link can either work through the desired effect of good monetary policy communication, which is known as the “ transparency effect ” as enhanced transparency might reduce the uncertainty about future monetary policy and through this the risk - premia. or – and this is the case that monetary policy should wish to avoid – market participants might increase their risk - taking if they take into account the fact that monetary policy will be relaxed in the case of decreasing asset prices in a financial downturn. in this case – the socalled insurance effect – market participants are implicitly insured against downside risks and therefore tend to take excessive risk. hence, we have to deal with a classic moral hazard problem. the questions that follow on from these rather theoretical considerations are “ what empirical evidence do we have on this transmission channel? ” and “ what lessons should monetary policy draw from its existence? ” empirical evidence some observations seem to confirm the existence of the risk - taking channel. the economic boom that began in 2002 was characterised by the coexistence of low monetary policy rates, very high asset prices and unusually low short - term risk perception. this suggests that the first dimension of the risk - taking channel was at work. in addition, a comprehensive “ search for yield ” process could also be observed in this market environment – that is the risk - taking channel worked via its second dimension of rigid nominal target returns. concerning the third dimension of the risk - taking channel, simple observation is not very helpful because it requires the empirical identification of the two effects. while the transparency effects is difficult to isolate from other effects which are at work, there is, however, some empirical evidence for the insurance effect. 7 apart from this, empirical research on the risk - taking channel is in its early stage and is consequently rather thin on the ground. therefore, we do not yet have firm empirical evidence for the existence and the relative importance of the risk - taking channel. however, recent ecb research shows for the euro area that low interest rates soften bank lending see borio, zhu ( 2008 ), “ capital regulation, risk - taking and monetary policy : a missing link in the transmission mechanism?