International Monetary Cooperation under Tariff Threats

Giorgio Basevi (), Flavio Delbono and Vincenzo Denicolo' ()

No 235, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyse games between two countries which use the threat of imposing a tariff to induce each other to follow monetary policies equivalent to those that would obtain under a cooperative game. The analysis shows that -- under certain assumptions concerning the shares of tariff revenues, what the countries spend on imports, the punishment structures and the discount factors -- the outcome of the game converges to the equivalent of the cooperative equilibrium, with zero tariffs and optimal monetary policies. It is suggested that the model could be applied to current relations between the US, Germany and Japan.

Keywords: Monetary Policy; Tariffs; Threat And Punishment Strategies (search for similar items in EconPapers)
Date: 1988-03
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Related works:
Journal Article: International monetary cooperation under tariff threats (1990)
Working Paper: International Monetary Cooperation Under Tariff Threats
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