DP2067 The European Central Bank: Decision Rules and Macroeconomic Performance

Author(s):	Yunus Aksoy, Paul De Grauwe, Hans Dewachter
Publication Date:	February 1999
Keyword(s):	EMU, linear feedback rules, monetary stability
JEL(s):	F33, F36, F42
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=2067

In this paper we analyse the effects of different decision rules in the ECB on monetary stability. We consider a model where asymmetric shocks and divergent propagation of shocks on output and inflation are potential causes of tensions within the ECB concerning the conduct of monetary (interest rate) policy. Given divergence of desired interest rates (due to the asymmetries) we analyse the effect of different voting procedures within the Governing Council of the ECB. Welfare implications are discussed.