Monetary Policy Coordination under Fixed and Floating Exchange Rates

Pierre de Trenqualye

Economic Journal, 1990, vol. 100, issue 400, 206-14

Abstract: This paper studies monetary policy coordination in a familiar fixed price perfect capital mobility multicountry model. It is shown that, under fixed exchange rates, countries can coordinate their policies and reach Pareto efficient outcomes with rules closely related to the Nash-based mechanisms that have been designed to overcome free riding in standard public good economies. The coordination rules defined in this paper do not make countries lose the control of their own policies. It is also shown that Nash implementation of Pareto efficient states with similar rules is, in general, not possible under floating exchange rates. Copyright 1990 by Royal Economic Society.

Date: 1990
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