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Sustainable international monetary policy cooperation

Author

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  • Ippei Fujiwara
  • Timothy Kam
  • Takeki Sunakawa

Abstract

We provide new insight on international monetary policy cooperation in a familiar two-country setting. A country facing a relatively more volatile markup shock has an incentive to deviate from an assumed Cooperation regime to a Non-cooperation regime. A similar result obtains if countries differ in size, have non-unitary elasticity of substitution between domestic and foreign goods, and have different degrees of trade openness (home bias in consumption). This motivates our study of an endogenous, history-dependent Sustainable Cooperation regime. Its history-contingent welfare redistributions are supported by incentive-compatible variations in resource transfers, through the terms of trade (or net exports). Such an endogenous cooperative solution may also provide a theoretical rationale for perceived occasional cooperation between national central banks in reality.
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Suggested Citation

  • Ippei Fujiwara & Timothy Kam & Takeki Sunakawa, 2015. "Sustainable international monetary policy cooperation," Globalization Institute Working Papers 234, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:234
    DOI: 10.24149/gwp234
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    References listed on IDEAS

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    Cited by:

    1. Taisuke Nakata & Takeki Sunakawa, 2020. "Credible Forward Guidance," CARF F-Series CARF-F-484, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    2. Taisuke Nakata & Takeki Sunakawa, 2019. "Credible Forward Guidance," Finance and Economics Discussion Series 2019-037, Board of Governors of the Federal Reserve System (U.S.).
    3. Fujiwara, Ippei & Wang, Jiao, 2017. "Optimal monetary policy in open economies revisited," Journal of International Economics, Elsevier, vol. 108(C), pages 300-314.

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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