Flexible Majority Rules for Central Banks
29 Pages Posted: 21 Jun 2004
There are 2 versions of this paper
Flexible Majority Rules for Central Banks
Date Written: May 2004
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, E52, E58, F33
Suggested Citation: Suggested Citation
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
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