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Optimal central bank design: benchmarks for the ECB

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  • Berger, Helge

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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Bibliographic Info

Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2005/27.

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Date of creation: 2005
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Handle: RePEc:zbw:fubsbe:200527

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

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References

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Citations

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Cited by:
  1. Jan-Egbert Sturm & Timo Wollmershäuser, 2008. "The Stress of Having a Single Monetary Policy in Europe," CESifo Working Paper Series 2251, CESifo Group Munich.
  2. Helge Berger & Till Mueller, 2007. "How should large and small countries be represented in a currency union?," Public Choice, Springer, vol. 132(3), pages 471-484, September.
  3. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central Bank boards around the world: why does membership size differ?," Discussion Papers 2008/5, Free University Berlin, School of Business & Economics.
  4. Szilárd Erhart & Jose Luis Vasquez-Paz, 2008. "Determinants of the size of a monetary policy committee: Theory and cross country evidence," Working Papers 2008-001, Banco Central de Reserva del Perú.
  5. Helge Berger & Volker Nitsc, 2011. "Too Many Cooks? Committees in Monetary Policy," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 452-475, October.
  6. Szilárd Erhart & Jose Luis Vasquez-Paz, 2007. "Optimal Monetary Policy Committee Size: Theory and Cross Country Evidence," Kiel Advanced Studies Working Papers 439, Kiel Institute for the World Economy.
  7. Szilárd Erhart & Harmen Lehment & Jose L. Vasquez Paz, 2007. "Monetary Policy Committee Size and Inflation Volatility," Kiel Working Papers 1377, Kiel Institute for the World Economy.
  8. H.J. Roelfsema, 2006. "Why are federal central banks more activist?," Working Papers 06-06, Utrecht School of Economics.
  9. 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, vol. 7(4), pages 35-41, December.

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