A new interpretation of the coordination problem and its empirical significance
In this paper, we discuss a new interpretation of what might be meant by the "coordination" of policies; in this interpretation, the policymakers are selecting a noncooperative solution rather than a cooperative solution. The new interpretation is suggested by the fact that games typically have a large number of Nash solutions, and players are not indifferent as to which occurs. The multiplicity of solutions may be due to information sharing and surveillance, the choice of policy instruments, or the adoption of reputational strategies in repeated versions of the game. The "coordination" problem: results from policymakers' desire to coordinate on a good Nash equilibrium. ; In section I, we use the simulations of the MCM and the DECO model that were prepared for the May 1988 FRB Monetary Conference to derive reduced forms for inflation and output, and we simulate a one-shot game. We calculate an uncoordinated Nash solution, a Nash solution coordinated on the low deficit assumption, two more Nash solutions coordinated on instruments as well as the low deficit assumption, and finally a cooperative solution. By comparing them, we hope to assess the empirical relevance of the new interpretation of the coordination problem. The Nash solutions based on the low deficit assumptions are to be viewed as approximations to coordinated Nash solutions based on information sharing and surveillance, always overstating their case. ; In section II, we provide new simulations from the MCM to illustrate the dynamic paths of four possible outcomes under coordination and to look for indicators. The simulations consider the two scenarios for U.S. government purchases--low and high. Given these two scenarios, two sets of possible responses are considered. The first set of responses correspond to when the policymakers are correct in predicting the path of the U.S. deficit. The second set of responses occur when the policymakers are wrong. The simulations show how much bett
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): (1990)
Issue (Month): ()
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stanley Fischer, 1987. "International Macroeconomic Policy Coordination," NBER Working Papers 2244, National Bureau of Economic Research, Inc.
- Holtham, Gerald & Hughes Hallett, Andrew, 1987. "International Policy Cooperation and Model Uncertainty," CEPR Discussion Papers 190, C.E.P.R. Discussion Papers.
- Currie, David & Levine, Paul L & Vidalis, Nic, 1987. "International Cooperation and Reputation in an Empirical Two-Bloc Model," CEPR Discussion Papers 198, C.E.P.R. Discussion Papers.
- Edison, Hali J. & Marquez, Jaime R. & Tryon, Ralph W., 1987. "The structure and properties of the Federal Reserve Board Multicountry Model," Economic Modelling, Elsevier, vol. 4(2), pages 115-315, April.
- Atish R. Ghosh & Paul R. Masson, 1988. "International Policy Coordination in a World with Model Uncertainty," IMF Staff Papers, Palgrave Macmillan, vol. 35(2), pages 230-258, June.
- Jeffrey A. Frankel and Katharine E. Rockett., 1987.
"International Macroeconomic Policy Coordination When Policy-Makers Disagree on the Model,"
Economics Working Papers
8744, University of California at Berkeley.
- Jeffrey A. Frankel & Katharine Rockett, 1986. "International Macroeconomic Policy Coordination When Policy-Makers Disagree on the Model," NBER Working Papers 2059, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A. & Rockett, Katherine E., 1987. "International Macroeconomic Policy Coordination When Policy-Makers Disagree on the Model," Department of Economics, Working Paper Series qt6ct8k549, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Hali J. Edison & Ralph Tryon, 1986. "An empirical analysis of policy coordination in the United States, Japan and Europe," International Finance Discussion Papers 286, Board of Governors of the Federal Reserve System (U.S.).
- Taylor, John B., 1985.
"International coordination in the design of macroeconomic policy rules,"
European Economic Review,
Elsevier, vol. 28(1-2), pages 53-81.
- John B. Taylor, 1984. "International Coordination in the Design of Macroeconomic Policy Rules," NBER Working Papers 1506, National Bureau of Economic Research, Inc.
- Warwick J. McKibbin & Jeffrey Sachs, 1986. "Coordination of Monetary and Fiscal Policies in the OECD," NBER Working Papers 1800, National Bureau of Economic Research, Inc.
- Canzoneri, Matthew B. & Henderson, Dale W., 1988. "Is sovereign policymaking bad?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 93-140, January.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgpr:y:1990:p:399-435. 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: (Kris Vajs)
If references are entirely missing, you can add them using this form.