Flexible Majority Rules for Central Banks
28 Pages Posted: 19 Jun 2003 Last revised: 1 Nov 2007
Date Written: August 2006
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.
Keywords: Central bank, voting, majority rule, flexible majority rules
JEL Classification: D72, F33, E52, E58
Suggested Citation: Suggested Citation