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.