We study how the optimal degree of conservatism relates to decision-making procedures in a Monetary Policy Committee (MPC). In our framework, central bank conservatism is required to attenuate the volatility of monetary decisions generated by the presence of uncertainty about the committee...

The paper examines the monetary-fiscal interactions in a monetary union model with uncertainty due to imperfect central bank transparency. We first show that monetary uncertainty disciplines fiscal policymakers and thereby reduces taxes, average inflation and output distortions. However, as more...

The paper examines the optimal combination of central bank independence and conservatism in the presence of uncertain central bank preferences. We develop a model of endogenous monetary policy delegation in which government chooses the central bank's degree of inde-pendence and conservatism so...

The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union,...

The paper analyzes the relation between monetary uncertainty and government incentives to implement economic reforms that reduce structural distortions and make economies more flexible. It is shown that uncertainty about the central bank’s reaction function leads to more reforms. I relate this...

What is the optimal institutional structure for an independent central bank? The paper shows when it will be optimal for a country to have a central bank to be organized according to federal, purely national or a combination of both aspects. The analysis is then extended to a supranational...

The pending enlargement of the European Monetary Union (EMU) has brought to the fore the discussion of the voting right distribution in the European Central Bank (ECB) council. We show that, in a model where labor unions internalize the inflationary consequences of wage setting, deviating from a...

When enacting labor market regulation governments face courts that interpret and implement the legal code. We show that the incentives for governments for labor market reform increase with the uncertainty that is involved in the implementation of legal codes through courts. Given that judges...

What policy objective should a common central bank in a heterogeneous monetary union pursue? Should it base its decisions on the EU-wide average of inflation and growth or should it instead focus on (appropriately weighted) national rates of inflation and growth? We find that a central bank that...

What policy objective should a common central bank in a heterogeneous monetary union pursue? Should it base its decisions on the EU-wide average of inflation and growth or should it instead focus on (appropriately weighted) national welfare losses based on national rates of inflation and growth?...