Designing Targeting Rules for International Monetary Policy Cooperation
Benigno, Pierpaolo and Benigno, Gianluca (2004) Designing Targeting Rules for International Monetary Policy Cooperation. [Discussion Paper]. Centre for Economic Performance, London School of Economics and Political Science, London, UK. p. 52. CEP Discussion Papers (dp0666). ISBN 0 7530 1806 3.
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This study analyzes a two-country dynamic general equilibrium model with nominal rigidities, monopolistic competition and producer currency pricing. A quadratic approximation to the utility of the consumers is derived and assumed as the policy objective function of the policymakers. It is shown that only under special conditions there are no gains from cooperation and moreover that the paths of the exchange rate and prices in the constrained-efficient solution depend on the kind of disturbance that affects the economy. It might be the case either for fixed or floating exchange rates. Despite this result, simple targeting rules that involve only targets for the growth of output and for both domestic GDP and CPI inflation rates can replicate the cooperative allocation.
|Item Type:||Report / Paper (Discussion Paper)|
|Research documents and activity classification:||Working Papers > Non-Refereed Working Papers / of national relevance only|
|Divisions:||Department of Business and Management|
|Uncontrolled Keywords:||Monetary Policy Cooperation, Sticky Prices, Welfare Analysis, Targeting Rules, Inflation Target|
|MIUR Scientific Area:||Area 13 - Economics and Statistics > SECS-P/01 Political Economy|
|Deposited By:||Maria Teresa Nistico|
|Deposited On:||11 Nov 2010 15:47|
|Last Modified:||15 Nov 2010 13:43|
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