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http://hdl.handle.net/10419/49923
  
Title:How should large and small countries be represented in a currency union? PDF Logo
Authors:Berger, Helge
Müller, Till
Issue Date:2004
Series/Report no.:School of Business & Economics Discussion Paper: Economics 2004/20
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:D72
E52
E58
F33
Document Type:Working Paper
Appears in Collections:Diskussionsbeiträge, FB Wirtschaftswissenschaft, FU Berlin

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