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Sustainable international monetary policy cooperation

Ippei Fujiwara, Timothy Kam and Takeki Sunakawa ()

Journal of Economic Dynamics and Control, 2019, vol. 106, issue C, -

Abstract: We provide new insight on international monetary policy cooperation in a familiar two-country setting. A country facing a relatively more volatile markup shock has an incentive to deviate from an assumed Cooperation regime to a Non-cooperation regime. A similar result obtains if countries differ in size, have non-unitary elasticity of substitution between domestic and foreign goods, and have different degrees of trade openness (home bias in consumption). This motivates our study of an endogenous, history-dependent Sustainable Cooperation regime. Its history-contingent welfare redistributions are supported by incentive-compatible variations in resource transfers, through the terms of trade (or net exports). Such an endogenous cooperative solution may also provide a theoretical rationale for perceived occasional cooperation between national central banks in reality.

Keywords: Monetary policy cooperation; Sustainable plans; Welfare (search for similar items in EconPapers)
JEL-codes: E52 F41 F42 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: Sustainable international monetary policy cooperation (2016) Downloads
Working Paper: Sustainable International Monetary Policy Cooperation (2016) Downloads
Working Paper: Sustainable international monetary policy cooperation (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:106:y:2019:i:c:6

DOI: 10.1016/j.jedc.2019.103721

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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