Policy Coordination Under Model Disagreement and Uncertainty

Carsten Hefeker and Michael Neugart

Open Economies Review, 2019, vol. 30, issue 4, No 5, 719-737

Abstract: Abstract What are the incentives for governments to coordinate their policies internationally when there is model disagreement and uncertainty? We build a model where countries disagree on policy targets and how policies affect the economies, and show that uncertainty not only determines the type of cooperative policy but also whether countries want to cooperate at all. Countries facing larger model disagreement also need to face larger uncertainty with respect to policy spillovers to agree on cooperation. Thus, uncertainty about spillovers can be a substitute for model agreement.

Keywords: Policy coordination; Uncertainty; Ideological commitment; Model disagreement (search for similar items in EconPapers)
JEL-codes: F42 F53 F55 F68 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Working Paper: Policy Coordination under Model Disagreement and Uncertainty (2019)
Working Paper: Policy coordination under model disagreement and uncertainty (2019)
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DOI: 10.1007/s11079-019-09529-7

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