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Sustainable international monetary policy cooperation

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  • Fujiwara, Ippei
  • Kam, Timothy
  • Sunakawa, Takeki

Abstract

We provide new insight on international monetary policy cooperation in a familiar two-country setting. A country facing a relatively more volatile markup shock has an incentive to deviate from an assumed Cooperation regime to a Non-cooperation regime. A similar result obtains if countries differ in size, have non-unitary elasticity of substitution between domestic and foreign goods, and have different degrees of trade openness (home bias in consumption). This motivates our study of an endogenous, history-dependent Sustainable Cooperation regime. Its history-contingent welfare redistributions are supported by incentive-compatible variations in resource transfers, through the terms of trade (or net exports). Such an endogenous cooperative solution may also provide a theoretical rationale for perceived occasional cooperation between national central banks in reality.

Suggested Citation

  • Fujiwara, Ippei & Kam, Timothy & Sunakawa, Takeki, 2019. "Sustainable international monetary policy cooperation," Journal of Economic Dynamics and Control, Elsevier, vol. 106(C), pages 1-1.
    • Handle: RePEc:eee:dyncon:v:106:y:2019:i:c:6
    DOI: 10.1016/j.jedc.2019.103721
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    Cited by:

    1. Taisuke Nakata & Takeki Sunakawa, 2019. "Credible Forward Guidance," Finance and Economics Discussion Series 2019-037, Board of Governors of the Federal Reserve System (U.S.).
    2. Batista, Quentin & Nakata, Taisuke & Sunakawa, Takeki, 2023. "Credible Forward Guidance," Journal of Economic Dynamics and Control, Elsevier, vol. 153(C).
    3. Fujiwara, Ippei & Wang, Jiao, 2017. "Optimal monetary policy in open economies revisited," Journal of International Economics, Elsevier, vol. 108(C), pages 300-314.
    4. Hefeker, Carsten, 2022. "Policy coordination under model disagreement and asymmetric shocks," Economic Modelling, Elsevier, vol. 114(C).

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    More about this item

    Keywords

    Monetary policy cooperation; Sustainable plans; Welfare;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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

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