The literature on central banking so far has provided explanations of why we observe independent central banks and why central banks are usually more conservative than governments. However, little is known about the interaction between the two institutions. Bridging the gap, we focus on the...

The literature on central banking so far has provided explanations of why we observe independent central banks and why central banks are usually more conservative than governments. However, little is known about the interaction between the two institutions. Bridging the gap, we focus on the...

Potential output-in the sense of the GDP level or path an economy can sustain over the medium term-is a crucial benchmark for policymakers. However, it is difficult to estimate when financial 'booms and busts' are driving the real economy. This paper uses a simple multivariate filtering approach...

The conservative central banker has come under attack recently. Explicitly modeling the interaction of a trade union with monetary policy, it has been argued that the standard solution to the inflationary bias in monetary policy might actually be welfare reducing if the trade union has an...

We analyze whether financial integration will lead to lower national regulation of domestic banking activities. In our model, banks' efforts and public regulation can lower the probability of bankruptcy. We contrast the national case with an integrated banking market and find that banks will...

The paper discusses key elements of optimal central bank design and applies its findings to the Eurosystem. A particular focus is on the size of monetary policy committees, the degree of centralization, and the representation of relative economic size in the voting rights of regional (or...

We examine the role of money in the policies of the ECB, using introductory statements of the ECB President at the monthly press conferences during 1999-2004. Over time, the relative amount of words devoted to the monetary analysis has decreased. Our analysis of indicators of the monetary policy...

We develop a simple model that looks at the incentives of private banks to behave prudentially and undertake costly efforts to lower the probability of bankruptcy or having to be bailed out by a lender of last resort. Government regulators can force banks to increase efforts beyond the privately...

Monetary policy in the euro area is conducted within a multi-country, multi-cultural, and multi-lingual context involving multiple central banking traditions. How does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the ECB? Using a...

This paper analyzes empirically differences in the size of central bank boards (or monetary policy committees) across countries. We discuss the possible determinants of a board's size. The empirical relevance of these factors is examined using a new dataset that covers the de jure membership...