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Yuta Saito
''Bargaining over Monetary Policy and Optimal Committee Composition in a Currency Union''
( 2018, Vol. 38 No.4 )
Drawing on the Barro-Gordon framework, this paper investigates the design of the monetary policy committee in a currency union which implements the optimal time-consistent policy. The monetary policy is determined through Nash bargaining between member countries, where the outside options consist of non-cooperation within the union. It is shown that the member which experiences a higher output should have a greater bargaining power to reduce the inflationary bias. We also found that the richer member's optimal bargaining power, which induces the equilibrium policy time-consistent, is U-shaped with respect to the heterogeneity in the output shock.
Keywords: Inflationary Bias, Time-Inconsistency, Barro-Gordon, Monetary Union, Nash Bargaining
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
F5 - International Relations and International Political Economy: General
Manuscript Received : Aug 18 2018 Manuscript Accepted : Oct 30 2018

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