International monetary policy coordination and financial market integration

Alan Sutherland ()

No 751, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The welfare gains from international coordination of monetary policy are analysed in a two-country model with sticky prices. The gains from coordination are compared under two alternative structures for financial markets: financial autarky and risk sharing. The welfare gains from coordination are found to be largest when there is risk sharing and the elasticity of substitution between home and foreign goods is greater than unity. When there is no risk sharing the gains to coordination are almost zero. It is also shown that the welfare gain from risk sharing can be negative when monetary policy is uncoordinated.

Keywords: International finance; International economic integration (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-fin and nep-mon
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Citations: View citations in EconPapers (35)

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Related works:
Working Paper: International Monetary Policy Coordination and Financial Market Integration (2004)
Working Paper: International monetary policy coordination and financial market integration (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:751

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