How to manage ﬁnancial shocks : Intra-European vs. international monetary coordination
AbstractUsing a four-country Mundell–Fleming model including portfolio and wealth eﬀects, we explore the question whether some types of policy coordination could improve the outcomes of a ﬁnancial shock like the Asian crisis. Time-consistent equilibria are computed : a Nash equilibrium, a target zone regime and a coalition solution. The best equilibrium for all authori- ties except the US government is the European coalition. Introducing a Stability Pact in Europe does not alter this result. Introducing a Fed less conservative than the ECB or the BoJ provokes a change in US preferences : both authorities give priority to the target zone regime.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/7133.
Date of creation: Dec 2003
Date of revision:
Publication status: Published in Journal of Macroeconomics, 2003, Vol. 25, no. 4. pp. 431-455.Length: 24 pages
Coordination; Financial crisis; Target zone; Time consistency; Stability pact;
Find related papers by JEL classification:
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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