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Why are federal central banks more activist?

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Author Info
Hein Roelfsema ()

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Abstract

This paper analyzes monetary policy making by a committee of regional representatives in a currency union with asymmetric shocks. By considering strategic delegation of monetary policy making, we show that regional representatives in a federal policy making committee may be more activist than the average citizen in their district. Hence, in our model federal central banks such as the ECB and the FED respond more aggressively to output shocks when compared to individual central banks.

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Paper provided by Utrecht School of Economics in its series Working Papers with number 06-06.

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Length: 19 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:use:tkiwps:0606

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Related research
Keywords: Central Banking; Asymmetric Shocks; Federations; Strategic Delegation;

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Find related papers by JEL classification:
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F53 - International Economics - - International Relations and International Political Economy - - - International Agreements and Observance; International Organizations
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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  1. Aksoy, Yunus & De Grauwe, Paul & Dewachter, Hans, 2002. "Do asymmetries matter for European monetary policy?," European Economic Review, Elsevier, vol. 46(3), pages 443-469, March. [Downloadable!] (restricted)
  2. Besley, Timothy J. & Coate, Stephen, 2000. "Centralized versus Decentralized Provision of Local Public Goods: a Political Economy Analysis," CEPR Discussion Papers 2495, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Kyle Bagwell & Robert W. Staiger, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March. [Downloadable!] (restricted)
    Other versions:
  4. Eijffinger, Sylvester & Hoeberichts, Marco & Schaling, Eric, 2000. " Optimal Central Bank Conservativeness in an Open Economy," Public Choice, Springer, vol. 105(3-4), pages 339-55, December. [Downloadable!] (restricted)
  5. David-Jan Jansen & Jakob de Haan, 2004. "Look Who’s Talking: ECB Communication during the First Years of EMU," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Blackwell Publishing, vol. 70(3), pages 649-665, 07. [Downloadable!] (restricted)
    Other versions:
  7. De Grauwe, Paul, 2000. "Monetary Policies In The Presence Of Asymmetries," CEPR Discussion Papers 2393, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Corinne Aaron-Cureau & Hubert Kempf, 2006. "Bargaining over monetary policy in a monetary union and the case for appointing an independent central banker," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 1-27, January. [Downloadable!] (restricted)
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  9. Mihov, Ilian & Sibert, Anne, 2002. "Credibility and Flexibility with Monetary Policy Committees," CEPR Discussion Papers 3278, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November. [Downloadable!] (restricted)
  11. Helge Berger, 2006. "Optimal Central Bank Design: Benchmarks for the ECB," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  12. Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2005. "Committee Decisions on Monetary Policy: Evidence from Historical Records of the Federal Open Market Committee," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033305, December.
  13. Heinemann, Friedrich & Huefner, Felix P., 2002. "Is the View from the Eurotower Purely European? : National Divergence and ECB Interest Rate Policy," ZEW Discussion Papers 02-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  14. Paul De Grauwe, 2000. "Monetary Policies in the Presence of Asymmetries," Journal of Common Market Studies, Blackwell Publishing, vol. 38(4), pages 593-612, November. [Downloadable!] (restricted)
  15. Havrilesky, Thomas & Gildea, John, 1995. "The Biases of Federal Reserve Bank Presidents," Economic Inquiry, Oxford University Press, vol. 33(2), pages 274-84, April.
  16. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 85-114, February.
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