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International monetary policy coordination in a new Keynesian model with NICE features

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  • Jean-Christophe Poutineau
  • Gauthier Vermandel

Abstract

The authors provide a static two-country new Keynesian model to teach two related questions in international macroeconomics: the international transmission of unilateral monetary policy decisions and the gains coming from the coordination monetary rules. They concentrate on “normal times” and use a thoroughly graphical approach to analyze the questions at hand. In this setting monetary policy is conducted using interest rates rules and economic integration between nations does not necessarily create the case for the coordination of monetary policy. In particular, they show that the conduct of optimal national monetary policies does not make any difference with the coordination of national policies, as this creates a situation where the international monetary system operates “Near an International Cooperative Equilibrium” (NICE).

Suggested Citation

  • Jean-Christophe Poutineau & Gauthier Vermandel, 2018. "International monetary policy coordination in a new Keynesian model with NICE features," The Journal of Economic Education, Taylor & Francis Journals, vol. 49(2), pages 151-166, April.
  • Handle: RePEc:taf:jeduce:v:49:y:2018:i:2:p:151-166
    DOI: 10.1080/00220485.2018.1438945
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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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