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International monetary policy coordination and financial market integration

Author

Listed:
  • Sutherland, Alan
Abstract
The welfare gains from international co-ordination of monetary policy are analysed in a two-country model with sticky prices. The gains from co-ordination are compared under two alternative structures for financial markets: financial autarky and risk sharing. The welfare gains from co-ordination are found to be largest when there is risk sharing and the elasticity of substitution between home and foreign goods is greater than unity. When there is no risk sharing the gains to co-ordination are almost zero. It is also shown that the welfare gain from risk sharing can be negative when monetary policy is uncoordinated. JEL Classification: E52, E58, F42

Suggested Citation

  • Sutherland, Alan, 2002. "International monetary policy coordination and financial market integration," Working Paper Series 174, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2002174
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial integration; monetary policy coordination; risk sharing;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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