Bargaining over EMU vs. EMS: Why Might the ECB Be the Twin Sister of the Bundesbank?
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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Volume (Year): 111 (2001)
Issue (Month): 473 (July)
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