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Abstract

Non-coordinated monetary policy is analysed in a stochastic two-country general equilibrium model. Non-coordinated equilibria are compared in two cases: one where policy is set in terms of state-contingent money supply rules, and one where policy is set in terms of state-contingent nominal interest rate rules. In general the non-coordinated equilibrium differs between the two types of policy rule, but a number of special cases are identified where the equilibria are identical. The endogenous choice of policy instrument is analysed and the Nash equilibrium in the choice of policy instrument is shown to depend on the interest elasticity of money demand.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 25 (2006)
Issue (Month): 6 (October)
Pages: 855-873

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Handle: RePEc:eee:jimfin:v:25:y:2006:i:6:p:855-873

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Web page: http://www.elsevier.com/locate/inca/30443

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Find related papers by JEL classification:

• E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
• E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
• F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

References

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Cited by:

1. Günter Coenen & Giovanni Lombardo & Frank Smets & Roland Straub, 2008. "International transmission and monetary policy cooperation," Working Paper Series 858, European Central Bank.
   
   • Günter Coenen & Giovanni Lombardo & Frank Smets & Roland Straub, 2007. "International Transmission and Monetary Policy Cooperation," NBER Chapters, in: International Dimensions of Monetary Policy, pages 157-192 National Bureau of Economic Research, Inc.
2. Lombardo, Giovanni, 2004. "Inflation targeting rules and welfare in an asymmetric currency area," Discussion Paper Series 1: Economic Studies 2004,04, Deutsche Bundesbank, Research Centre.
   
   • Lombardo, Giovanni, 2006. "Inflation targeting rules and welfare in an asymmetric currency area," Journal of International Economics, Elsevier, vol. 68(2), pages 424-442, March.
3. Giovanni Lombardo & Alan Sutherland, 2003. "Monetary and fiscal interactions in open economies," Working Paper Series 289, European Central Bank.
   
   • Lombardo, Giovanni & Sutherland, Alan, 2004. "Monetary and fiscal interactions in open economies," Journal of Macroeconomics, Elsevier, vol. 26(2), pages 319-347, June.

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