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International Fiscal Coordination under Imperfect Information

Author

Listed:
  • Jungsoo Park

    (Sogang University)

  • Kang-Oh Yi

    (Sogang University)

  • Doyoung Kim

    (Sogang University)

Abstract

This study investigates the issue of optimal fiscal policies and international fiscal coordination across economies in the world of uncertainties and imperfect information. It lays out the strategic problems of coordination that we inevitably encounter when the integration of international capital markets is a reality and when we do not have enough information about other countries. In this international environment, the results show that there exists a precommitment mechanism with noncooperative dynamic equilibria, which would render us a higher level of welfare than the non-coordiation outcome. In these equilibria, the phases of low outcomes with high interest rates will appear intermittently between the phases of high outcomes with low interest rates. Under the proposed system, the results indicate that welfare will be reduced as uncertainty increases, whereas the gains from adopting this proposed mechanism will grow as the number of countries with open capital markets increases.

Suggested Citation

  • Jungsoo Park & Kang-Oh Yi & Doyoung Kim, 2007. "International Fiscal Coordination under Imperfect Information," Korean Economic Review, Korean Economic Association, vol. 23, pages 303-328.
    • Handle: RePEc:kea:keappr:ker-200712-23-2-04
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    References listed on IDEAS

    as
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    4. James W. Friedman, 1973. "A Non-cooperative Equilibrium for Supergames: A Correction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 435-435.
    5. Kehoe, Patrick J., 1987. "Coordination of fiscal policies in a world economy," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 349-376, May.
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    7. Matthew B. Canzoneri & Dale W. Henderson, 1991. "Monetary Policy in Interdependent Economies: A Game-Theoretic Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031787, December.
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    More about this item

    Keywords

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    JEL classification:

    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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