National representation in supranational institutions: The case of the European Central Bank

Supranational institutions face an important trade-off when hiring personnel. On the one hand,
hiring decisions are based, as in most organizations, on a candidate's professional
qualifications. On the other hand, supranational institutions often aim for broad national
representation. Reviewing evidence from the European Central Bank, we show that
nationality is indeed relevant for both hiring and decision-making. Specifically, we find a
disproportionately narrow spread of national representation in the top management of the
ECB. Further, there is evidence for the existence of national networks between adjacent
management layers. Finally, monetary policy decisions seem to be linked to national
representation in the core business areas of the ECB. Examining a sample of 27 European
countries over the period from 1999 to 2008, we estimate Taylor rules for alternative sets of
euro area aggregates derived from different weighting schemes of national macroeconomic
data. Our results indicate that weights based on national representation in the mid-level
management of the ECB's core business areas best describe the central bank's interest-rate
setting behavior.