Monetary Policies in Interdependent Economies with Stochastic Disturbances: A Strategic Approach
This paper analyzes strategic monetary policies using a standard two country stochastic macro model. Three noncooperative equilibria, namely Cournot, Stackelberg, and Consistent Conjectural Variations, are considered.The Pareto Optimal equilibrium, where aggregate joint costs are minimizedis also considered, and all strategic equilibria are compared to the perfectly fixed and flexible exchange rate regimes. The main conclusions obtained are:(i) Demand shocks are much less problematical than supply disturbances from the viewpoint of macro stabilization; (ii) the gains from cooperation are typically small; (iii) the strategic equilibria all show substantial margins of superiority over the fixed and flexible regimes.
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Volume (Year): 96 (1986)
Issue (Month): 383 (September)
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- Buiter,Willem H. & Marston,Richard C., 1986.
"International Economic Policy Coordination,"
Cambridge University Press, number 9780521337809, December.
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- Gilles Oudiz & Jeffrey Sachs, 1984. "Macroeconomic Policy Coordination among the Industrial Economies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 1-76. Full references (including those not matched with items on IDEAS)