Dynamic Strategic Monetary Policies and Coordination in Interdependent Economies
AbstractThis paper develops strategic monetary policies using a standard two-country macro model under flexible exchange rates. The equilibria considered include feedback Nash and feedback Stackelberg, both of which are compared to the Pareto optimal cooperative equilibrium. The optimal policies are obtained as feedback rules in which real money supplies are adjusted to movements in the real exchange rate. The properties of these policies and their welfare implications are analyzed using numerical simulations. The contrast in the present results with those obtained previously for a short-run horizon suggest the importance of both intertemporal and intratemporal tradeoffs in the d etermination of optimal strategic policies. Copyright 1988 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 78 (1988)
Issue (Month): 3 (June)
Other versions of this item:
- Stephen J. Turnovsky & Tamer Basar & Vasco d'Orey, 1987. "Dynamic Strategic Monetary Policies and Coordination in Interdependent Economies," NBER Working Papers 2467, National Bureau of Economic Research, Inc.
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- Taylor, John B., 1985.
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- Marcus Miller & Mark Salmon, 1985. "Policy Coordination And Dynamic Games," NBER Chapters, in: International Economic Policy Coordination, pages 184-227 National Bureau of Economic Research, Inc.
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- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
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- Martin K. Perry, 1982. "Oligopoly and Consistent Conjectural Variations," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 197-205, Spring.
- Turnovsky, Stephen J, 1986.
"Monetary and Fiscal Policy under Perfect Foresight: A Symmetric Two-country Analysis,"
London School of Economics and Political Science, vol. 53(210), pages 139-57, May.
- Stephen J. Turnovsky, 1985. "Monetary and Fiscal Policy Under Perfect Foresight: A Symmetric Two Country Analysis," NBER Working Papers 1699, National Bureau of Economic Research, Inc.
- Morton I. Kamien & Nancy L. Schwartz, 1983. "Conjectural Variations," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 191-211, May.
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