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Central Bank Design in General Equilibrium
- Journal of Money, Credit, and Banking
- The Ohio State University Press
- Volume 36, Number 1, February 2004
- pp. 95-113
- 10.1353/mcb.2004.0002
- Article
- Additional Information
We study the effects of alternative institutional arrangements for the determination of monetary policy in the context of a capital-theoretic, general equilibrium economy. We consider three institutional arrangements for determining monetary policy. The first, unconditional majority voting, always leads to a substantial inflation bias. The second, a simple form of bargaining which we interpret as a policy board, generally improves on the unconditional majority voting outcome. Finally,we consider a constitutional rule which always achieves the social optimum.