Advanced Search
MyIDEAS: Login to save this paper or follow this series

International Monetary Policy to Promote Economic Recovery


Author Info

  • Buiter, Willem H


The paper studies the design of efficient anti-inflationary policies in a two-country interdependent economic system. A number of alternative specifications of the price formation process are considered, incorporating successively higher degrees of price level and inflation inertia. The credibility of current announcements of future monetary policy is a necessary and sufficient condition for costless, immediate disinflation only in the classical flexible price level model with forward-looking rational expectations. If price level inertia prevails, a costless and immediate disinflation by means of a deceleration of the money growth rate must be accompanied by nominal money 'jumps' or cost-reducing tax cuts in order to accommodate the fall in velocity that follows the disinflation. With a sluggish price level and sluggish core inflation, tax cuts (or incomes policy) are necessary for costless disinflation. In general, the elimination of inflation can only be gradual. With real balance effects on demand, unilateral disinflationary policy always 'spills over' through real interest rates and the real exchange rate. These real balance effects are necessary for the presence of spillovers only in the classical model. Cooperative policy design effectively leaves the national authorities with the same scope for influencing domestic target variables that they would have had in a closed economy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 55.

as in new window
Date of creation: Mar 1985
Date of revision:
Handle: RePEc:cpr:ceprdp:55

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:

Related research

Keywords: Anti-Inflationary Policies; Cooperative Policy Design; Credibility; Expectations; Price Inertia;

Other versions of this item:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Willem H. Buiter, 2004. "The Elusive Welfare Economics of Price Stability as a Monetary Policy Objective: Should New Keynesian Central Bankers Pursue Price Stability?," NBER Working Papers 10848, National Bureau of Economic Research, Inc.
  2. Buiter, Willem H., 2006. "The elusive welfare economics of price stability as a monetary policy objective: why New Keynesian central bankers should validate core inflation," Working Paper Series 0609, European Central Bank.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:55. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.