International Policy Coordination in a Dynamic Macroeconomic Model
This paper illustrates the role for macroeconomic policy coordination when interdependent economies are pursuing disinflationary policies. Under flexible exchangerates, policy makers have an incentive to reduce inflation by pursuing contractionary policies that yield a currency appreciation. In a Nash, perfect foresight equilibrium,policy authorities in the model pursue contractionary policies to achieve currency appreciation, but these attempts cancel out, with the result that all countries end up pursuing excessively contractionary policies (relative to asymmetric Pareto optimum). The paper presents these resultsin a two-country, infinite-horizon difference game.
|Date of creation:||Jul 1983|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Matthew B. Canzoneri & Jo Anna Gray, 1983. "Two essays on monetary policy in an interdependent world," International Finance Discussion Papers 219, Board of Governors of the Federal Reserve System (U.S.).
- Willem H. Buiter & Marcus H. Miller, 1980. "Monetary Policy and International Competitiveness," NBER Working Papers 0591, National Bureau of Economic Research, Inc.
- Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-45, December.
- Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1166. 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: ()
If references are entirely missing, you can add them using this form.