The choice of monetary instrument in two interdependent economies under uncertainty
This paper analyzes the choice of monetary instrument in a stochastic two country setting where each country's set of monetary policy instruments includes both the money supply and the interest rate. It shows how the optimal choice of instrument is determined In two stages. First, for each pair, the minimum welfare coat for each economy is determined This defines a par of payoff matrices and the second stage involves determining the Nash equilibrium for this bimatrix game. In our illustrative example for the alternative shocks considered, a dominant Nash equilibrium is always obtained.
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- Buiter,Willem H. & Marston,Richard C., 1986.
"International Economic Policy Coordination,"
Cambridge University Press, number 9780521337809, December.
- Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-564, October.
- William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
- Joshua Aizenman & Jacob A. Frenkel, 1984.
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NBER Working Papers
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"Monetary Policies in Interdependent Economies with Stochastic Disturbances: A Strategic Approach,"
Royal Economic Society, vol. 96(383), pages 696-721, September.
- Stephen J. Turnovsky & Vasco d'Orey, 1986. "Monetary Policies in Interdependent Economies with Stochastic Disturbances: A Strategic Approach," NBER Working Papers 1824, National Bureau of Economic Research, Inc.
- Turnovsky, Stephen J., 1984.
"Exchange market intervention under alternative forms of exogenous disturbances,"
Journal of International Economics,
Elsevier, vol. 17(3-4), pages 279-297, November.
- Stephen J. Turnovsky, 1984. "Exchange Market Intervention Under Alternative Forms of Exogenous Disturbances," NBER Working Papers 1289, National Bureau of Economic Research, Inc.
- Joseph Farrell, 1987. "Cheap Talk, Coordination, and Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 34-39, Spring.
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