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Bargaining over EMU vs. EMS: Why Might the ECB Be the Twin Sister of the Bundesbank?

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  • Debrun, Xavier

Abstract

Various authors argue that the European Central Bank (ECB) closely resembles the Bundesbank because of similarities in the legal status and in the behaviour of the two institutions. That "twin-sister hypothesis" (TSH) contrasts with theoretical analyses that often assume a "symmetric" ECB. We propose a model where countries bargain over the "type" of the ECB, defined as the set of relative weights attached to individual preferences in the joint objective function of the bank. We find the conditions under which the TSH is a Nash bargaining equilibrium. The model emphasises the potential impact of the relative weight held by each country in the European Monetary System (EMS).

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  • Debrun, Xavier, 2001. "Bargaining over EMU vs. EMS: Why Might the ECB Be the Twin Sister of the Bundesbank?," Economic Journal, Royal Economic Society, vol. 111(473), pages 566-590, July.
  • Handle: RePEc:ecj:econjl:v:111:y:2001:i:473:p:566-90
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    Cited by:

    1. Xavier Debrun & Paul R. Masson, 2013. "Modelling Monetary Union in Southern Africa: Welfare Evaluation for the CMA and SADC," South African Journal of Economics, Economic Society of South Africa, vol. 81(2), pages 275-291, June.
    2. Blanca SANCHEZ-ROBLES & Adolfo MAZA FERNANDEZ, "undated". "An Attempt to Modelize the ECB Monetary Policy," EcoMod2004 330600124, EcoMod.
    3. Fatum, Rasmus, 2006. "One monetary policy and 18 central bankers: The European monetary policy as a game of strategic delegation," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 659-669, May.
    4. Beetsma, Roel & Bovenberg, A Lans, 2001. "Structural Distortions and Decentralized Fiscal Policies in EMU," CEPR Discussion Papers 2851, C.E.P.R. Discussion Papers.
    5. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 454-481, May.
    6. Tamon Asonuma & Xavier Debrun & Paul R Masson, 2012. "Welfare Effects of Monetary Integration; The Common Monetary Area and Beyond," IMF Working Papers 12/136, International Monetary Fund.
    7. Rasmus Fatum, 2003. "One Monetary Policy and Eighteen Central Bankers: The European Monetary Policy as a Game of Strategic Delegation," EPRU Working Paper Series 03-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    8. Kim, Tae-Joon & Ryou, Jai-Won & Takagi, Shinji, 2005. "Regional monetary integration in the presence of two large countries: What modality makes sense for East Asia?," Japan and the World Economy, Elsevier, vol. 17(2), pages 171-187, April.

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