Strategic Delegation in Monetary Unions
AbstractIn monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation-that countries may choose the types of delegates to influence outcomes in their favor. We show that without commitment in monetary policy, strategic delegation arises if and only if three conditions are met: shocks affecting individual countries are not perfectly correlated, risk-sharing across countries is imperfect, and the Phillips curve is nonlinear. Moreover, inflation rates are inefficiently high. We argue that ways of solving the commitment problem, including the emphasis on price stability in the agreements constituting the European Union, are especially valuable when strategic delegation is a problem. Copyright Blackwell Publishing Ltd and The Victoria University of Manchester, 2004.
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Bibliographic InfoArticle provided by University of Manchester in its journal The Manchester School.
Volume (Year): 72 (2004)
Issue (Month): s1 (09)
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Other versions of this item:
- V. V. Chari & Larry E. Jones & Ramon Marimon, 2004. "Strategic Delegation in Monetary Unions," Working Papers 135, Barcelona Graduate School of Economics.
- V.V. Chari & Larry E. Jones & Ramon Marimon, 2004. "Strategic delegation in monetary unions," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 842, Department of Economics and Business, Universitat Pompeu Fabra.
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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