Flexible Majority Rules for Central Banks
Swiss Federal Institute of Technology Zurich, (CER-ETH); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)
affiliation not provided to SSRN
We propose a flexible majority rule for central-bank councils where the size of the majority depends monotonically on the change in interest rate within a particular time frame. Small changes in interest rate require a small share of supporting votes, even less than 50%. We show that flexible majority rules are superior to simple majority rules and can implement the optimal monetary policy under a variety of circumstances.
Number of Pages in PDF File: 28
Keywords: Central bank, voting, majority rule, flexible majority rules
JEL Classification: D72, F33, E52, E58working papers series
Date posted: June 19, 2003 ; Last revised: November 1, 2007
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