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Bargaining over Monetary Policy and Optimal Committee Composition in a Currency Union

Author

Listed:
  • Yuta Saito

    (Sophia University)

Abstract

Drawing on the Barro-Gordon framework, this paper investigates the design of the monetary policy committee in a currency union which implements the optimal time-consistent policy. The monetary policy is determined through Nash bargaining between member countries, where the outside options consist of non-cooperation within the union. It is shown that the member which experiences a higher output should have a greater bargaining power to reduce the inflationary bias. We also found that the richer member's optimal bargaining power, which induces the equilibrium policy time-consistent, is U-shaped with respect to the heterogeneity in the output shock.

Suggested Citation

  • Yuta Saito, 2018. "Bargaining over Monetary Policy and Optimal Committee Composition in a Currency Union," Economics Bulletin, AccessEcon, vol. 38(4), pages 1986-1996.
    • Handle: RePEc:ebl:ecbull:eb-18-00675
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    File URL: http://www.accessecon.com/Pubs/EB/2018/Volume38/EB-18-V38-I4-P182.pdf
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    References listed on IDEAS

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    Cited by:

    1. Saito, Yuta, 2025. "Exit expectations and the optimal design of a currency union," Economics Letters, Elsevier, vol. 247(C).
    2. Yuta Saito, 2022. "A Note on Time Inconsistency and Endogenous Exits from a Currency Union," Games, MDPI, vol. 13(2), pages 1-8, February.
    3. Bruno Beltrão Léo & Maria Teresa Vieira Campos Proença & Carlos Francisco Ferreira Alves, 2025. "Central bank committee decision-making: a systematic literature review and research agenda," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(3), pages 320-339, September.
    4. Saito, Yuta, 2020. "A note on exit and inflation bias in a currency union," MPRA Paper 102717, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F5 - International Economics - - International Relations, National Security, and International Political Economy

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