Introducing Instruments of Central Bank Accountability in a Monetary Union

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 depending on the degree of autonomy of the central bank. Instruments of 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 certain mechanism. We show that the agreement between the governments will only be unanimous for the definition of the inflation target of the central bank