How to Manage Financial Shocks: Intra-European vs. International Monetary Coordination

Jerome Creel, Fabrice Capoen, Pascal Cussy and Hélène Lenoble-Liaud
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Fabrice Capoen: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique
Pascal Cussy: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Hélène Lenoble-Liaud: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: Using a four-country Mundell–Fleming model including portfolio and wealth effects, we explore the question whether some types of policy coordination could improve the outcomes of a financial shock like the Asian crisis. Time-consistent equilibria are computed: a Nash equilibrium, a target zone regime and a coalition solution. The best equilibrium for all authorities except the US government is the European coalition. Introducing a Stability Pact in Europe does not alter this result. Introducing a Fed less conservative than the ECB or the BoJ provokes a change in US preferences: both authorities give priority to the target zone regime.

Date: 2003-12
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Citations: View citations in EconPapers (12)

Published in Journal of Macroeconomics, 2003, 25 (4), pp.431 - 455. ⟨10.1016/j.jmacro.2003.07.002⟩

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Journal Article: How to manage financial shocks: Intra-European vs. international monetary coordination (2003)
Working Paper: How to Manage Financial Shocks: Intra-European vs. International Monetary Coordination (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03416786

DOI: 10.1016/j.jmacro.2003.07.002

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