Games for Central Bankers: Markets vs. Politics in Public Policy Decisions

Alessandra Casella

No 2496, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper questions the link between the establishment of a common currency among several countries and the necessity of political coordination. It begins by discussing why conducting a single monetary policy is thought to be easier within a single political unit. It then proceeds to enquire whether market mechanisms could be used to choose optimally the common policy of heterogeneous actors, and thus provide an alternative to political decision-making. The advantage of market mechanisms is that they are transparent, predictable, and usually more efficient. In particular, the paper studies a simple game through which national representatives could choose the monetary policy of a single, multinational central bank. There are no fundamental logical objections or impossible practical obstacles to such market games, and even if they are rejected on principle, they are useful in suggesting desirable amendments to traditional voting schemes.

Keywords: European monetary union; European central bank; Policy coordination; Public goods (search for similar items in EconPapers)
JEL-codes: D70 E58 F33 (search for similar items in EconPapers)
Date: 2000-07
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Games for Central Bankers, Markets v/s Politics in Public Policy Decisions (2000)
Working Paper: Games for Central Bankers: Markets v/s Politics in Public Policy Decisions (2000)
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