A Simple Framework for International Monetary Policy Analysis

Richard Clarida, Jordi Galí and Mark Gertler

No 8870, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the international monetary policy design problem within an optimizing two-country sticky price model, where each country faces a short run tradeoff between output and inflation. The model is sufficiently tractable to solve analytically. We find that in the Nash equilibrium, the policy problem for each central bank is isomorphic to the one it would face if it were a closed economy. Gains from cooperation arise, however, that stem from the impact of foreign economic activity on the domestic marginal cost of production. While under Nash central banks need only adjust the interest rate in response to domestic inflation, under cooperation they should respond to foreign inflation as well. In either scenario, flexible exchange rates are desirable.

JEL-codes: E5 F3 (search for similar items in EconPapers)
Date: 2002-04
New Economics Papers: this item is included in nep-ifn and nep-mon
Note: ME
References: Add references at CitEc
Citations: View citations in EconPapers (594)

Published as Clarida, Richard, Jordi Gali and Mark Gertler. "A Simple Framework For International Monetary Policy Analysis," Journal of Monetary Economics, 2002, v49(5,Jul), 879-904.

Downloads: (external link)
http://www.nber.org/papers/w8870.pdf (application/pdf)

Related works:
Journal Article: A simple framework for international monetary policy analysis (2002)
Working Paper: A Simple Framework for International Monetary Policy Analysis (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:8870

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w8870

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().