How to manage ﬁnancial shocks : Intra-European vs. international monetary coordination
Using a four-country Mundell–Fleming model including portfolio and wealth eﬀects, we explore the question whether some types of policy coordination could improve the outcomes of a ﬁnancial shock like the Asian crisis. Time-consistent equilibria are computed : a Nash equilibrium, a target zone regime and a coalition solution. The best equilibrium for all authori- ties except the US government is the European coalition. Introducing a Stability Pact in Europe does not alter this result. Introducing a Fed less conservative than the ECB or the BoJ provokes a change in US preferences : both authorities give priority to the target zone regime.
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|Date of creation:||Dec 2003|
|Date of revision:|
|Publication status:||Published in Journal of Macroeconomics, 2003, Vol. 25, no. 4. pp. 431-455.Length: 24 pages|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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