An empirical analysis of policy coordination in the United States, Japan and Europe

Hali Edison () and Ralph W. Tryon

No 286, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Coordination of macroeconomic policy has been a major topic at recent summit meetings, and has been the subject of a number of theoretical studies. However, relatively little empirical research exists on policy coordination. This paper is an attempt to help fill this gap. The paper considers the quantitative importance of the coordination of fiscal and monetary policy under flexible exchange rates. We also evaluate the mechanisms by which the effects of macroeconomic policy are transmitted abroad. The nature of the equilibrium reached in the absence of coordination is also analyzed, and the empirical results are related to the theoretical literature. The analysis is based on simulations with the Multicountry Model (MCM) developed at the Federal Reserve Board.

Keywords: Fiscal policy; Monetary policy; International economic relations; Japan; Germany (search for similar items in EconPapers)
Date: 1986
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