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Global Implications of Self-Oriented National Monetary Rules

Author

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  • Obstfeld, Maurice
  • Rogoff, Kenneth S.

Abstract

It is well-known that if international linkages are relatively small, the potential gains to international monetary policy coordination are typically quite limited. But when goods and financial markets are tightly linked, is it problematic if countries unilaterally design their monetary policy rules? Are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination? We argue that under plausible assumptions the answer is no. Unless risk aversion is very high, lack of coordination in rule setting is a second-order problem compared with the overall gains from macroeconomic stabilization.

Suggested Citation

  • Obstfeld, Maurice & Rogoff, Kenneth S., 2002. "Global Implications of Self-Oriented National Monetary Rules," Scholarly Articles 34721962, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:34721962
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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