Introducing Instruments of Central Bank Accountability in a Monetary Union

With an increasing number of independent central banks, accountability of central banks is also getting more attention. This paper analyses the possibility of introducing instruments of central bank accountability in a monetary union. In our model, monetary policy is influenced by the governments of the member states according to the degree of independence granted to the central bank. Instruments of democratic accountability are introduced which generate different expected losses for a government. The amount of the expected loss will determine the approval of a government to the implementation of a particular mechanism. We show that the agreement between the governments will only be unanimous for the definition of the inflation target of the central bank. Copyright Springer Science+Business Media, LLC 2007Independence, Accountability, Monetary union, E52, E58,

A Non-compensative Index for Country Risk in OECD Countries

In the last few years a fast growth of international lending and foreign investment has been happening. As a consequence of the large \ufb02ow of capital going towards new developing countries, the risk exposure of the lenders and investors is rising, and country risk analysis becomes more and more important for the international \ufb01nancial operators. In the present paper we propose a non-compensatory index to reckon the country risk (since now, Country Risk) in OECD countries: the Mazziotta Pareto Index (MPI). It assumes the \u201cnon-substitutability\u201d of the dimensions, all of them being considered of the same importance, without any compensation possible among them. The indicator classi\ufb01es the Ocse countries into six main groups, according to their high or low country risk. Although based on a small number of variables, the MPI can to assess quite correctly the pre-\ufb01gurative \u201clatent dimensions\u201d of the Country Risk in the short run. The proposed index sheds light particularly on the risk linked to political-economical events and decisions,and on the public \ufb01nance.The Country Risk Index proposed allows to asses international country risk ratings comparatively, and to single out the relevance of economic, \ufb01nancial and political risk as components of a general risk rating