Fixed exchange rates and non-cooperative monetary policies

Miguel Sebastián
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Miguel Sebastián: Universidad Complutense de Madrid, Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa)

No 87-14, Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales

Abstract: This paper presents a model which in a world with fixed exchange rates and absence of capital controls non-cooperative game yield multiple Nash equilibria with nonoptimal allocations, when we introduce regimes as strategies for the players. In general there is a unique Perfect Equilibrium for the game with both strategies. The sub-optimality of the non-cooperative solution provides scope for international coordination, in the form of joint choice of non-inflationary polices that dominate the Nash equilibria allocations.

Keywords: Tipos de cambio fijos; Fixer exchange rates; Monetary policies non-coperative; Políticas monetarias no cooperativas; Nash. (search for similar items in EconPapers)
Pages: 44 pages
Date: 1987
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