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Games for Central Bankers: Markets vs. Politics in Public Policy Decisions

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  • Casella, Alessandra

Abstract

This paper questions the link between the establishment of a common currency among several countries and the necessity of political coordination. It begins by discussing why conducting a single monetary policy is thought to be easier within a single political unit. It then proceeds to enquire whether market mechanisms could be used to choose optimally the common policy of heterogeneous actors, and thus provide an alternative to political decision-making. The advantage of market mechanisms is that they are transparent, predictable, and usually more efficient. In particular, the paper studies a simple game through which national representatives could choose the monetary policy of a single, multinational central bank. There are no fundamental logical objections or impossible practical obstacles to such market games, and even if they are rejected on principle, they are useful in suggesting desirable amendments to traditional voting schemes.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2496.

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Date of creation: Jul 2000
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Handle: RePEc:cpr:ceprdp:2496

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Keywords: European Central Bank; European Monetary Union; Policy Coordination; Public Goods;

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References

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Cited by:
  1. Lossani, Marco & Natale, Piergiovanna & Tirelli, Patrizio, 2001. "A Reform Proposal for EMU Institutions," MPRA Paper 18694, University Library of Munich, Germany.
  2. Ansgar Belke & Dirk Kruwinnus, 2003. "Erweiterung der EU und Reform des EZB-Rats: Rotation versus Delegation," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 218/2003, Department of Economics, University of Hohenheim, Germany.

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