Flexible Majority Rules for Central Banks

28 Pages Posted: 19 Jun 2003 Last revised: 1 Nov 2007

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Bernhard Pachl

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: August 2006

Abstract

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

Gersbach, Hans and Pachl, Bernhard, Flexible Majority Rules for Central Banks (August 2006). Available at SSRN: https://ssrn.com/abstract=391720 or http://dx.doi.org/10.2139/ssrn.391720

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bernhard Pachl (Contact Author)

affiliation not provided to SSRN

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