The Gains From International Monetary Cooperation Revisited

Author/Editor:

Ivan Tchakarov

Publication Date:

January 1, 2004

Electronic Access:

Download PDF. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 04/1

Subject:

English

Publication Date:

January 1, 2004

ISBN/ISSN:

9781451841664/1018-5941

Stock No:

WPIEA0012004

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

46

Please address any questions about this title to publications@imf.org