IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_988.html
   My bibliography  Save this paper

Self-Enforcing International Agreements and Domestic Policy Credibility

Author

Listed:
  • Paola Conconi
  • Carlo Perroni

Abstract

We explore the relationship between international policy coordination and domestic policy credibility when both must be self-supporting. Our arguments are presented in the context of a two-country, two-period model of dynamic emission abatement with transboundary pollution, where government policies suffer from a time-consistency problem. In the absence of repeated interaction, any form of coordination - between governments, and between governments and their respective private sectors - improves policy making. Nevertheless, under repeated interaction international policy spillovers can make it possible to overcome the domestic credibility problem; and, conversely, the inability to precommit to policy domestically can help support international policy cooperation.

Suggested Citation

  • Paola Conconi & Carlo Perroni, 2003. "Self-Enforcing International Agreements and Domestic Policy Credibility," CESifo Working Paper Series 988, CESifo.
  • Handle: RePEc:ces:ceswps:_988
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp988.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tarriff Cooperation During the Formation of Regional Free Trade Areas," NBER Working Papers 4364, National Bureau of Economic Research, Inc.
    3. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    4. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    5. Magnus Lodefalk & John Whalley, 2002. "Reviewing Proposals for a World Environmental Organisation," The World Economy, Wiley Blackwell, vol. 25(5), pages 601-617, May.
    6. Pearce, David & Stacchetti, Ennio, 1997. "Time Consistent Taxation by a Government with Redistributive Goals," Journal of Economic Theory, Elsevier, vol. 72(2), pages 282-305, February.
    7. Brunetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1998. "Credibility of Rules and Economic Growth: Evidence from a Worldwide Survey of the Private Sector," The World Bank Economic Review, World Bank, vol. 12(3), pages 353-384, September.
    8. Paul Krugman, 1989. "Is Bilateralism Bad?," NBER Working Papers 2972, National Bureau of Economic Research, Inc.
    9. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Pollution permits and environmental innovation," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 127-140, October.
    10. Matsuyama, Kiminori, 1990. "Perfect Equilibria in a Trade Liberalization Game," American Economic Review, American Economic Association, vol. 80(3), pages 480-492, June.
    11. Rudiger Dornbusch & James M. Poterba (ed.), 1991. "Global Warming: Economic Policy Responses," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204126x, December.
    12. Patrick J. Kehoe, 1989. "Policy Cooperation Among Benevolent Governments May Be Undesirable," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(2), pages 289-296.
    13. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
    14. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
    15. Stokey, Nancy L, 1989. "Reputation and Time Consistency," American Economic Review, American Economic Association, vol. 79(2), pages 134-139, May.
    16. James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
    17. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-837, December.
    18. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kamal Saggi & Halis Murat Yildiz, 2018. "Bilateral Trade Agreements and the Feasibility of Multilateral Free Trade," World Scientific Book Chapters, in: Kamal Saggi (ed.), Economic Analysis of the Rules and Regulations of the World Trade Organization, chapter 8, pages 168-185, World Scientific Publishing Co. Pte. Ltd..
    2. Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
    3. Conconi, Paola & Perroni, Carlo, 2009. "Do credible domestic institutions promote credible international agreements?," Journal of International Economics, Elsevier, vol. 79(1), pages 160-170, September.
    4. repec:zbw:bofitp:2004_012 is not listed on IDEAS
    5. Everaert, Greetje M.M., 2004. "The political economy of restructuring and subsidisation : an international perspective," BOFIT Discussion Papers 12/2004, Bank of Finland, Institute for Economies in Transition.
    6. Pierre Salmon, 2003. "The assignment of powers in an open-ended European Union," Post-Print hal-00445601, HAL.
    7. Everaert, Greetje M.M., 2004. "The political economy of restructuring and subsidisation: an international perspective," BOFIT Discussion Papers 12/2004, Bank of Finland Institute for Emerging Economies (BOFIT).
    8. Greetje Everaert, 2003. "The Political Economy of Restructuring and Subsidisation: An International Perspective," LICOS Discussion Papers 13003, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Conconi, Paola & Perroni, Carlo, 2009. "Do credible domestic institutions promote credible international agreements?," Journal of International Economics, Elsevier, vol. 79(1), pages 160-170, September.
    2. Luisa Lambertini & Paul Levine & Joseph Pearlman, 2007. "Fiscal Policy in a Monetary Union: Can Fiscal Cooperation be Counterproductive?," School of Economics Discussion Papers 1707, School of Economics, University of Surrey.
    3. Staiger, Robert W., 1995. "International rules and institutions for trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551, Elsevier.
    4. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," American Economic Review, American Economic Association, vol. 93(5), pages 1522-1542, December.
    5. Michael D. Bordo, 1993. "The gold standard, Bretton Woods and other monetary regimes: a historical appraisal," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 123-191.
    6. Conconi, Paola & Perroni, Carlo, 2015. "Special and Differential Treatment of Developing Countries in the WTO," World Trade Review, Cambridge University Press, vol. 14(1), pages 67-86, January.
    7. Paola Conconi & Carlo Perroni, 2012. "Conditional versus unconditional trade concessions for developing countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(2), pages 613-631, May.
    8. Michael D. Bordo & Finn E. Kydland, 1990. "The Gold Standard as a Rule," NBER Working Papers 3367, National Bureau of Economic Research, Inc.
    9. Nicola Acocella & Giovanni Bartolomeo, 2004. "Is a Conservative Central Banker a (Perfect) Substitute for Wage Coordination?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 31(2), pages 281-294, June.
    10. Martin, Fernando M., 2015. "Debt, inflation and central bank independence," European Economic Review, Elsevier, vol. 79(C), pages 129-150.
    11. Loewy, Michael B., 1995. "Equilibrium policy with dynamically naive agents," Journal of Macroeconomics, Elsevier, vol. 17(2), pages 319-331.
    12. Mr. Roel M. W. J. Beetsma & Mr. Xavier Debrun & Mr. Franc Klaassen, 2001. "Is Fiscal Policy Coordination in EMU Desirable?," IMF Working Papers 2001/178, International Monetary Fund.
    13. Mats Persson & Torsten Persson & Lars E. O. Svensson, 1998. "Debt, Cash Flow and Inflation Incentives: A Swedish Example," International Economic Association Series, in: Guillermo Calvo & Mervyn King (ed.), The Debt Burden and its Consequences for Monetary Policy, chapter 2, pages 28-66, Palgrave Macmillan.
    14. Gersbach, Hans & Glazer, Amihai, 1999. "Markets and Regulatory Hold-Up Problems," Journal of Environmental Economics and Management, Elsevier, vol. 37(2), pages 151-164, March.
    15. Barthélemy, Jean & Mengus, Eric, 2018. "The signaling effect of raising inflation," Journal of Economic Theory, Elsevier, vol. 178(C), pages 488-516.
    16. repec:hal:spmain:info:hdl:2441/713kqq1pgu80lr8fn0lsuuh8lf is not listed on IDEAS
    17. Aaron Tornell, 1989. "Inconsistencia dinámica de los programas proteccionistas," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 4(1), pages 61-82.
    18. Westerhout, Ed, 2021. "Inflation-Linked Bonds, Nominal Bonds, and Countercyclical Monetary Policies," Discussion Paper 2021-001, Tilburg University, Center for Economic Research.
    19. D'Amato, Marcello & Martina, Riccardo, 2005. "Credibility and commitment of monetary policy in open economies," European Journal of Political Economy, Elsevier, vol. 21(4), pages 872-902, December.
    20. Richard Dennis & Tatiana Kirsanova, 2010. "Expectations traps and coordination failures: selecting among multiple discretionary equilibria," Working Paper Series 2010-02, Federal Reserve Bank of San Francisco.
    21. Schaumburg, Ernst & Tambalotti, Andrea, 2007. "An investigation of the gains from commitment in monetary policy," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 302-324, March.

    More about this item

    Keywords

    policy commitment; self-enforcing international agreements;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_988. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.