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Monetary Union: The Ins and Outs of Strategic Delegation
Author(s) -
Levine Paul,
Pearlmann Joseph
Publication year - 2001
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00249
Subject(s) - delegation , delegate , economics , monetary policy , sovereignty , conservatism , monetary hegemony , independence (probability theory) , monetary economics , international economics , political science , politics , statistics , mathematics , management , computer science , law , programming language
This paper addresses the conduct of monetary and fiscal policy in a closed trading bloc consisting of ‘ins’ forming a monetary union and ‘outs’ who retain monetary sovereignty. All governments, however, can opt for a particular choice of institutional arrangement for their central bank and delegate monetary policy to central banks with varying degrees of independence or equivalently ‘conservatism’. This paper examines the outcome when these decisions are individually rational for governments and are taken strategically, taking into account the intra‐country interactions between fiscal authorities and their own central banks, and the inter‐country interactions between the same players.