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Can International Policy Coordination Really Be Counterproductive?

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  • Carraro, Carlo
  • Giavazzi, Francesco

Abstract

This paper shows that international policy coordination is not counterproductive in a world where the incentive to run beggar-thy-neighbor policies internationally arises from the inefficiency that characterizes, within each country, the interaction between policymakers and private agents. The domestic inefficiency arises from the presence of nominal contracts that give central banks the power to affect real variables. In this setting we show that international cooperation belongs to the central banks' dominant strategy. The paper is motivated by a common and misleading interpretation of a paper by Rogolf `1985(, namely that international cooperation may be counterproductive in the presence of a domestic inefficiency.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 258.

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Date of creation: Aug 1988
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Handle: RePEc:cpr:ceprdp:258

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Related research

Keywords: Institutions; International Cooperation; Monetary Policy; Sequential Games;

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References

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  1. Rochet, Jean-Charles, 1987. "Some recent results in bargaining theory," European Economic Review, Elsevier, vol. 31(1-2), pages 326-335.
  2. Canzoneri, Matthew B. & Henderson, Dale W., 1988. "Is sovereign policymaking bad?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 93-140, January.
  3. Giavazzi, Francesco & Giovannini, Alberto, 1986. "Monetary Policy Interactions under Managed Exchange Rates," CEPR Discussion Papers 123, C.E.P.R. Discussion Papers.
  4. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
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Cited by:
  1. Carlo Carraro, 1997. "Modelling International Policy Games: Lessons from European Monetary Coordination," Empirica, Springer, vol. 24(3), pages 163-177, October.
  2. Thomas Willett, 1999. "Developments in the Political Economy of Policy Coordination," Open Economies Review, Springer, vol. 10(2), pages 221-253, May.
  3. Carrera, Jorge Eduardo, 1995. "Efectos precio y comercio en un area monetaria asimetrica
    [Price and trade effects in an asymmetric monetary area]    ," MPRA Paper 7844, University Library of Munich, Germany.

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