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Restructuring the ECB

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  • Helge Berger
  • Jakob de Haan
  • Robert Inklaar

Abstract

Soon, euro area membership could more than double, with the vast majority of accession countries being quite different in economic terms compared with current members. Under the current decision-making system, this can lead to high decisionmaking costs and there is a risk that monetary policy could deviate from the targets specified in the Maastricht treaty. While centralization might be a “first-best” solution to these problems in many ways, there are possible disadvantages from a political economy perspective, including a potential conflict with the established voting rights of current euro area member countries. An alternative solution to ensure the European perspective of decision-making in the ECB Council is to match economic size and voting power. One way to implement this principle is a rotation scheme for national central bank governors that takes economic differences between the member countries into account. The paper discusses various rotation schemes, also with a view to the decision-making cost argument.

Suggested Citation

  • Helge Berger & Jakob de Haan & Robert Inklaar, 2003. "Restructuring the ECB," CESifo Working Paper Series 1084, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1084
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Arnold, Ivo J.M., 2006. "Optimal regional biases in ECB interest rate setting," European Journal of Political Economy, Elsevier, vol. 22(2), pages 307-321, June.
    2. Fahrenberger, Theresa & Gersbach, Hans, 2010. "Minority voting and long-term decisions," Games and Economic Behavior, Elsevier, vol. 69(2), pages 329-345, July.
    3. Fidrmuc, Jarko & Korhonen, Iikka, 2006. "Meta-analysis of the business cycle correlation between the euro area and the CEECs," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 518-537, September.
    4. Helge Berger, 2006. "Optimal central bank design: Benchmarks for the ECB," The Review of International Organizations, Springer, vol. 1(3), pages 207-235, September.
    5. C.J.M. Kool, 2005. "What Drives ECB Monetary Policy?," Working Papers 05-03, Utrecht School of Economics.
    6. Bojeşteanu, Elena & Manu, Ana Simona, 2011. "Analiza empirică a sincronizării ciclului de afaceri şi a similarităţii şocurilor între România şi zona euro
      [Empirical analysis of business cycle synchronization and shock similarity between Roman
      ," MPRA Paper 31295, University Library of Munich, Germany.
    7. Bernd Hayo & Guillaume Méon, 2012. "Why Countries Matter for Monetary Policy Decision-Making in the ESCB," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(1), pages 21-26, 04.
    8. Ullrich, Katrin, 2004. "Decision-Making of the ECB: Reform and Voting Power," ZEW Discussion Papers 04-70, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Christos S. Savva & Kyriakos C. Neanidis & Denise R. Osborn, 2010. "Business cycle synchronization of the euro area with the new and negotiating member countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(3), pages 288-306.
    10. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, vol. 24(4), pages 817-832, December.
    11. Ullrich, Katrin, 2006. "An impact of country-specific economic developments on ECB decisions," ZEW Discussion Papers 06-049, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Tatomir, Cristina F. & Popovici, Oana, 2011. "Eyes on Romania: what to look when investing here?," MPRA Paper 36140, University Library of Munich, Germany.
    13. Christian Fahrholz & Philipp Mohl, 2004. "EMU-enlargement and the Reshaping of Decision-making within the ECB Governing Council: A Voting-Power Analysis," Eastward Enlargement of the Euro-zone Working Papers wp23, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Jun 2004.
    14. 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.
    15. Helge Berger, 2006. "Unfinished business? The ECB reform ahead of euro area enlargement," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(4), pages 35-41, December.

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    Keywords

    European Central Bank; centralization of monetary policy; EMU; transition countries; accession countries;

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