The Gains From International Monetary Cooperation Revisited

January 1, 2004

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Format: Chicago

Ivan Tchakarov. The Gains From International Monetary Cooperation Revisited, (USA: International Monetary Fund, 2004) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the issue of whether countries can improve their welfare by coordinating macroeconomic policies. The main purpose is to compute the gains from international monetary cooperation as the difference between the steady state consumption levels associated with the Nash and the cooperative outcomes of the game in which monetary authorities pursue active monetary policy. A numerical second-order approximation makes the solution of the model possible. Contrary to Obstfeld and Rogoff (2002), who claim that the gains from international cooperation in monetary policy are negligible, the paper finds that they could be very significant and reach as high as 2.2 percent of steady state consumption. This suggests that individual countries could experience significant welfare losses if they concentrate only on domestic stabilization policies.

Subject: Consumption, Financial markets, Labor, National accounts, Prices, Securities markets, Sticky prices, Wages

Keywords: Consumption, Consumption index, Global, Goods sector, Monetary policy, Monetary policy coordination, Price index, Second-order approximation, Securities markets, Steady state consumption, Sticky prices, Utility function, Wages, Welfare gain, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/001
Stock No:

WPIEA0012004
ISBN:

9781451841664
ISSN:

1018-5941

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