DP4398 Flexible Majority Rules for Central Banks
|Author(s):||Hans Gersbach, Bernhard Pachl|
|Publication Date:||May 2004|
|Keyword(s):||central bank, flexible majority rules, majority rule, voting|
|JEL(s):||D72, E52, E58, F33|
|Programme Areas:||International Macroeconomics, Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4398|
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.