International monetary co-operation in a world of imperfect information

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International monetary co-operation in a world of imperfect information

Author Info

Tan, Kang Yong () (University of Oxford)
Tanaka, Misa () (Bank of England)

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Abstract

This paper examines the welfare implications of international monetary co-operation using a stylised two-country New Keynesian general equilibrium model of imperfect information. We show that setting a self-oriented monetary policy rule generally leads to welfare gains relative to passive monetary policy even when central banks do not have perfect information about the foreign economy. However, information sharing between central banks in this set-up, by itself, has ambiguous welfare implications. Gains from monetary co-ordination are largest when productivity shocks are negatively correlated across countries.

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Paper provided by Bank of England in its series Bank of England working papers with number 344.

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Length: 30 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:boe:boeewp:0344

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Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-09-20 (All new papers)
NEP-CBA-2008-09-20 (Central Banking)
NEP-MON-2008-09-20 (Monetary Economics)
NEP-OPM-2008-09-20 (Open MacroEconomics)

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This page was last updated on 2009-11-27.

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