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International Monetary Cooperation Under Tariff Threats

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  • G. Basevi
  • F. Delbono
  • V. Denicolo

Abstract

We analyze games between two countries that use the tariff as a threat to induce each other to follow monetary policies equivalent to those that would obtain under a cooperative game. The analysis shows that under certain assumptions concerning the shares of tariff revenues that the countries spend on imports, the punishment structure, and the discount factors, the outcome of the games converges to a monetary policies. It is suggested that the model could be applaied to current relations between the US, Germany and Japan.

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  • G. Basevi & F. Delbono & V. Denicolo, "undated". "International Monetary Cooperation Under Tariff Threats," Working Papers 40, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:40
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    Cited by:

    1. Cacciatore, Matteo & Ghironi, Fabio, 2021. "Trade, unemployment, and monetary policy," Journal of International Economics, Elsevier, vol. 132(C).
    2. Marion Kohler, 1998. "Optimal currency areas and customs unions: are they connected?," Bank of England working papers 89, Bank of England.
    3. Dudley Cooke, 2016. "Optimal Monetary Policy with Endogenous Export Participation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 72-88, July.
    4. Stahl, Dale O. & Turunen-Red, Arja H., 1995. "Tariff games: Cooperation with random variation in political regimes," European Journal of Political Economy, Elsevier, vol. 11(2), pages 215-238, June.

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