The Ramsey Cooperative and Non-Cooperative Unconventional Monetary Policy

Shifu Jiang

No 180, FIW Working Paper series from FIW

Abstract: I study the Ramsey problem for three unconventional monetary policies in a twocountry model. An equity injection into financial intermediaries is the most efficient policy. Due to precautionary effects of future risk, a central bank should exit from these policies in accordance with but slower than the speed of deleveraging in the financial sector. The optimal policy is changed considerably if cross-country policy cooperation is not imposed. In this case, the unconventional interventions tend to be too strong in one country but too weak in the other. The cooperation gain is a function of policy cost. At last, I evaluate several simple rules and find that the rule responding to gaps in asset prices mimics the optimal policy very well.

JEL-codes: C63 E44 E58 F41 F42 (search for similar items in EconPapers)
Pages: 33
Date: 2017-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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