IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

On policy interactions among nations : when do cooperation and commitment matter ?

  • Hubert Kempf

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Banque de France - Direction de la Recherche)

  • Leopold Von Thadden

    ()

    (European Central Bank - ECB)

This paper offers a framework to study commitment and cooperation issues in games with multiple policymakers. To reconcile some puzzles in the recent literature on the nature of policy interactions among nations, we prove that games characterized by different commitment and cooperation schemes can admit the same equilibrium outcome if certain spillover effects vanish at the common solution of these games. We provide a detailed discussion of these spillovers, showing that, in general, commitment and cooperation are non-trivial issues. Yet, in linear-quadratic models with multiple policymakers commitment and cooperation schemes are shown to become irrelevant under certain assumptions. The framework is sufficiently general to cover a broad range of results from the recent literature on policy interactions as special cases, both within monetary unions and among fully sovereign nations.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://halshs.archives-ouvertes.fr/halshs-00344773/document
Download Restriction: no

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00344773.

as
in new window

Length:
Date of creation: Nov 2008
Date of revision:
Publication status: Published in Documents de travail du Centre d'Economie de la Sorbonne 2008.71 - ISSN : 1955-611X. 2008
Handle: RePEc:hal:cesptp:halshs-00344773
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00344773
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Cukierman, A. & Lippi, F., 1999. "Labor markets and Monetary Union : A Strategic Analysis," Discussion Paper 1999-100, Tilburg University, Center for Economic Research.
  2. Beetsma, Roel & Bovenberg, A Lans, 1998. "The Optimality of a Monetary Union Without a Fiscal Union," CEPR Discussion Papers 1975, C.E.P.R. Discussion Papers.
  3. Giancarlo Corsetti & Paolo Pesenti, 2001. "International Dimensions of Optimal Monetary Policy," NBER Working Papers 8230, National Bureau of Economic Research, Inc.
  4. Devereux, Michael B, 1990. "International Cooperation, Precommitment, and Welfare," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 439-56, May.
  5. Alan Sutherland, 2002. "International monetary policy coordination and financial market integration," International Finance Discussion Papers 751, Board of Governors of the Federal Reserve System (U.S.).
  6. Dixit, Avinash & Lambertini, Luisa, 2001. "Monetary-fiscal policy interactions and commitment versus discretion in a monetary union," European Economic Review, Elsevier, vol. 45(4-6), pages 977-987, May.
  7. Persson, Torsten & Tabellini, Guido, 1995. "Double-Edged Incentives: Institutions and Policy Coordination," CEPR Discussion Papers 1141, C.E.P.R. Discussion Papers.
  8. Michael B. Devereux & Charles Engel, 2000. "Monetary Policy in the Open Economy Revisited: Price Setting and Exchange Rate Flexibility," Working Papers 042000, Hong Kong Institute for Monetary Research.
  9. Matthew B. Canzoneri & Dale W. Henderson, 1991. "Monetary Policy in Interdependent Economies: A Game-Theoretic Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031787.
  10. Lombardo, Giovanni & Sutherland, Alan, 2004. "Monetary and fiscal interactions in open economies," Journal of Macroeconomics, Elsevier, vol. 26(2), pages 319-347, June.
  11. Russell Cooper & Hubert Kempf, 2004. "Overturning Mundell : Fiscal policy in a monetary union," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00266420, HAL.
  12. Maurice Obstfeld & Kenneth Rogoff, 1999. "New Directions for Stochastic Open Economy Models," NBER Working Papers 7313, National Bureau of Economic Research, Inc.
  13. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  14. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad T., 2005. "The need for international policy coordination: what's old, what's new, what's yet to come?," Journal of International Economics, Elsevier, vol. 66(2), pages 363-384, July.
  15. Gilles Oudiz & Jeffrey Sachs, 1984. "Macroeconomic Policy Coordination among the Industrial Economies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 1-76.
  16. Maurice Obstfeld and Kenneth Rogoff., 2001. "Global Implications of Self-Oriented National Monetary Rules," Center for International and Development Economics Research (CIDER) Working Papers C01-120, University of California at Berkeley.
  17. Canzoneri, Matthew B. & Henderson, Dale W., 1988. "Is sovereign policymaking bad?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 93-140, January.
  18. Beetsma, Roel M.W.J. & Jensen, Henrik, 2005. "Monetary and fiscal policy interactions in a micro-founded model of a monetary union," Journal of International Economics, Elsevier, vol. 67(2), pages 320-352, December.
  19. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-71, October.
  20. Günter Coenen & Giovanni Lombardo & Frank Smets & Roland Straub, 2007. "International Transmission and Monetary Policy Cooperation," NBER Chapters, in: International Dimensions of Monetary Policy, pages 157-192 National Bureau of Economic Research, Inc.
  21. Benigno, Gianluca & Benigno, Pierpaolo, 2003. "Designing targeting rules for international monetary policy cooperation," Working Paper Series 0279, European Central Bank.
  22. Chari, V V & Kehoe, Patrick J, 1990. "International Coordination of Fiscal Policy in Limiting Economies," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 617-36, June.
  23. Clarida, Richard & Galí, Jordi & Gertler, Mark, 2002. "A Simple Framework for International Monetary Policy Analysis," CEPR Discussion Papers 3355, C.E.P.R. Discussion Papers.
  24. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe : What are the Consequences?," Discussion Paper 2002-32, Tilburg University, Center for Economic Research.
  25. V.V. Chari & Patrick J. Kehoe, 2004. "On the Desirability of Fiscal Constraints in a Monetary Union," NBER Working Papers 10232, National Bureau of Economic Research, Inc.
  26. Klaus Adam & Roberto M. Billi, 2007. "Monetary conservatism and fiscal policy," Research Working Paper RWP 07-01, Federal Reserve Bank of Kansas City.
  27. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August.
  28. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," Boston College Working Papers in Economics 575, Boston College Department of Economics.
  29. Benigno, Pierpaolo, 2002. "A simple approach to international monetary policy coordination," Journal of International Economics, Elsevier, vol. 57(1), pages 177-196, June.
  30. Beetsma, R.M.W.J. & Bovenberg, A.L., 1995. "Monetary union without fiscal coordination may discipline policymakers," Discussion Paper 1995-59, Tilburg University, Center for Economic Research.
  31. Varadarajan V. Chari & Patrick J. Kehoe, 2008. "Time Inconsistency and Free-Riding in a Monetary Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1329-1356, October.
  32. Ferrero, Andrea, 2009. "Fiscal and monetary rules for a currency union," Journal of International Economics, Elsevier, vol. 77(1), pages 1-10, February.
  33. Chari, V.V. & Kehoe, Patrick J., 2007. "On the need for fiscal constraints in a monetary union," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2399-2408, November.
  34. Calmfors, Lars, 2001. "Unemployment, Labor Market Reform, and Monetary Union," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 265-89, April.
  35. Giancarlo Corsetti & Paolo Pesenti, 2001. "Welfare and Macroeconomic Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 421-445.
  36. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
  37. Patrick J. Kehoe, 1989. "Policy Cooperation Among Benevolent Governments May Be Undesirable," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 289-296.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00344773. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.