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Optimal Central Bank Design: Benchmarks for the ECB

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  • Helge Berger

Abstract

The paper discusses key elements of optimal central bank design and applies its findings to the Eurosystem. A particular focus is on the size of monetary policy committees, the degree of centralization, and the representation of relative economic size in the voting rights of regional (or sectoral) interests. Broad benchmarks for the optimal design of monetary policy committees are derived, combining relevant theoretical arguments with available empirical evidence. A new indicator compares the mismatch of relative regional economic size and voting rights in the monetary policy committees of the US Fed, the pre-1999 German Bundesbank, and the ECB over time. Based on these benchmarks, there seems to be room to improve the organization of the ECB Governing Board and current plans for reform.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1697.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1697

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Keywords: central bank design; federal central banks; ECB; Eurosystem; ECB reform;

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References

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Cited by:
  1. Szilárd Erhart & Jose Luis Vasquez-Paz, 2007. "Optimal Monetary Policy Committee Size: Theory and Cross Country Evidence," Kiel Advanced Studies Working Papers, Kiel Institute for the World Economy 439, Kiel Institute for the World Economy.
  2. Berger, Helge & Müller, Till, 2004. "How should large and small countries be represented in a currency union?," Discussion Papers, Free University Berlin, School of Business & Economics 2004/20, Free University Berlin, School of Business & Economics.
  3. Jan-Egbert Sturm & Timo Wollmershäuser, 2008. "The Stress of Having a Single Monetary Policy in Europe," CESifo Working Paper Series, CESifo Group Munich 2251, CESifo Group Munich.
  4. Helge Berger & Volker Nitsch, 2008. "Too many Cooks? Committees in Monetary Policy," CESifo Working Paper Series, CESifo Group Munich 2274, CESifo Group Munich.
  5. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central Bank boards around the world: why does membership size differ?," Discussion Papers, Free University Berlin, School of Business & Economics 2008/5, Free University Berlin, School of Business & Economics.
  6. Szilárd Erhart & Jose Luis Vasquez-Paz, 2008. "Determinants of the size of a monetary policy committee: Theory and cross country evidence," Working Papers, Banco Central de Reserva del Perú 2008-001, Banco Central de Reserva del Perú.
  7. H.J. Roelfsema, 2006. "Why are federal central banks more activist?," Working Papers, Utrecht School of Economics 06-06, Utrecht School of Economics.
  8. Szilárd Erhart & Harmen Lehment & Jose L. Vasquez Paz, 2007. "Monetary Policy Committee Size and Inflation Volatility," Kiel Working Papers, Kiel Institute for the World Economy 1377, Kiel Institute for the World Economy.
  9. Carsten Hefeker & Blandine Zimmer, 2014. "Optimal Conservatism and Collective Monetary Policymaking under Uncertainty," CESifo Working Paper Series, CESifo Group Munich 4933, CESifo Group Munich.
  10. Helge Berger, 2006. "Unfinished business? The ECB reform ahead of euro area enlargement," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 7(4), pages 35-41, December.

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