Working Paper: CEPR ID: DP4398
Authors: Hans Gersbach; Bernhard Pachl
Abstract: We propose a flexible majority rule for central bank councils where the size of the majority depends monotonically on the change in interest rate within a particular time frame. Small changes in interest rate require a small share of supporting votes, even less than 50%. We show that flexible majority rules are superior to simple majority rules and can implement the optimal monetary policy under a variety of circumstances.
Keywords: central bank; flexible majority rules; majority rule; voting
JEL Codes: D72; E52; E58; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| flexible majority rules (D71) | better monetary policy outcomes (E61) |
| simple majority rules (D79) | worse monetary policy outcomes (E49) |
| flexible majority rules (D71) | enhanced decision-making efficiency (D91) |