One Monetary Policy and Eighteen Central Bankers: The European Monetary Policy as a Game of Strategic Delegation

Posted: 7 May 2005 Last revised: 7 Jun 2013

See all articles by Rasmus Fatum

Rasmus Fatum

University of Alberta - Department of Marketing, Business Economics & Law

Multiple version iconThere are 2 versions of this paper

Date Written: 2005

Abstract

This paper employs a multi-country delegation monetary policy model and argues that a decision making mechanism based on the median voter theorem where intensity of preferences cannot play a role does not capture important aspects of policy-setting in the European Monetary Union. Replacing the median voter mechanism with a less restrictive "weighted mean mechanism", it is shown that strategic delegation can lead to a surprising degree of central bank inflation aversion. This finding supports the "The Twin Sister Hypothesis" and the perception of the European Central Bank implementing the policy of the Bundesbank rather than a more inflationary monetary policy.

Keywords: Monetary Union, decision-making, strategic delegation

JEL Classification: C72, D72, E58, F33

Suggested Citation

Fatum, Rasmus, One Monetary Policy and Eighteen Central Bankers: The European Monetary Policy as a Game of Strategic Delegation (2005). Journal of Monetary Economics, Vol. 53, Issue 4, 2006, University of Alberta School of Business Research Paper No. 2013-354, Available at SSRN: https://ssrn.com/abstract=715762

Rasmus Fatum (Contact Author)

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-3951 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/rfatum

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