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Majority voting may not rule (in monetary unions): A comment on Matsen and Røisland [Eur. J. Political Economy 21 (2005) 365-384]

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  • Méon, Pierre-Guillaume

Abstract

This note reconsiders the results obtained by Matsen and Røisland [Eur. J. Political Economy 21 (2005) 365-384] by dropping the simplifying assumption that the median of country-specific shocks is equal to their mean. Majority voting then increases the volatility of the chosen interest rate without giving member countries a sufficient probability of having their domestic shocks absorbed by the common monetary policy. It thus results in lower welfare than other decision rules. When the variances of domestic shocks sufficiently differ, voting may however reduce the volatility of the interest rate and raise welfare in more stable countries.

Suggested Citation

  • Méon, Pierre-Guillaume, 2008. "Majority voting may not rule (in monetary unions): A comment on Matsen and Røisland [Eur. J. Political Economy 21 (2005) 365-384]," European Journal of Political Economy, Elsevier, vol. 24(1), pages 269-279, March.
    • Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:269-279
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    Cited by:

    1. Bernd Hayo & Guillaume Méon, 2012. "Why Countries Matter for Monetary Policy Decision-Making in the ESCB," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(1), pages 21-26, 04.
    2. Carsten Hefeker & Blandine Zimmer, 2015. "Optimal Conservatism and Collective Monetary Policymaking under Uncertainty," Open Economies Review, Springer, vol. 26(2), pages 259-278, April.
    3. Farvaque, Etienne & Matsueda, Norimichi & Méon, Pierre-Guillaume, 2009. "How monetary policy committees impact the volatility of policy rates," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 534-546, December.

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