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.