We investigate the question of whether sophistication in risk management fosters banking stability. We compare a simple banking system that uses an average rating with a sophisticated banking system in which banks are able to assess the default risk of entrepreneurs individually. Both banking...

We examine whether it is sufficient for central banks to observe and forecast nominal variables only. Analyzing the interplay of wage-setting unions and a central bank we show that although central banks may not gain more information by directly acquiring data about indicators of real shocks in...

We examine whether the monetary policy committee of a monetary union should publish its voting records when members are appointed by national politicians. We show that the publication of voting records lowers overall welfare. This finding also holds for arbitrary levels of private benefits from...

We propose a flexible majority rule for central-bank committees where the size of the majority depends monotonically on the change in interest rate within a particular time frame. Small changes in the interest rate require a small share, while larger changes require a larger share of supporting...