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The Gains From International Monetary Cooperation Revisited
Author: Mr. Ivan Tchakarov
Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 001
Language:
English
Publication Date:
01 Jan 2004
DOI:
https://doi.org/10.5089/9781451841664.001
ISBN:
9781451841664
ISSN:
1018-5941
Pages:
46
Keywords:
WP; monetary policy; price index; monetary policy coordination; second-order approximation; steady state consumption; goods sector; welfare gain; consumption index; utility function; Consumption; Sticky prices; Securities markets; Wages; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines the issue of whether countries can improve their welfare by coordinating macroeconomic policies. The main purpose is to compute the gains from international monetary cooperation as the difference between the steady state consumption levels associated with the Nash and the cooperative outcomes of the game in which monetary authorities pursue active monetary policy. A numerical second-order approximation makes the solution of the model possible. Contrary to Obstfeld and Rogoff (2002), who claim that the gains from international cooperation in monetary policy are negligible, the paper finds that they could be very significant and reach as high as 2.2 percent of steady state consumption. This suggests that individual countries could experience significant welfare losses if they concentrate only on domestic stabilization policies.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund

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