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Title:How should large and small countries be represented in a currency union? PDF Logo
Authors:Berger, Helge
Mueller, Till
Issue Date:2004
Series/Report no.:CESifo working papers 1344
Abstract:The likely extension of the euro area has triggered a debate on the organization of the ECB, in particular on the apparent mismatch between relative economic size and voting rights in the Council. We present a simple model of optimal representation in a federal central bank addressing this question. Optimal voting weights reflect two opposing forces: the wish to insulate common monetary policy from changing preferences at the national level, and the attempt to avoid an overly active or passive reaction to idiosyncratic national economic shocks. A perfect match between economic size and voting rights is rarely optimal, and neither is the ?one country, one vote principle?. Empirically, there are indications that the pattern of over- and under-representation of member countries in the ECB Council might be extreme by the standards of the US Fed and German Bundesbank and not always optimal.
Subjects:Central Bank
Federal Central Bank
Currency Union
optimal representation
voting
ECB
JEL:E52
D72
F33
E58
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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