TY - JOUR AU - Sachs,Jeffrey TI - International Policy Coordination in a Dynamic Macroeconomic Model JF - National Bureau of Economic Research Working Paper Series VL - No. 1166 PY - 1983 Y2 - July 1983 DO - 10.3386/w1166 UR - http://www.nber.org/papers/w1166 L1 - http://www.nber.org/papers/w1166.pdf N1 - Author contact info: Jeffrey D. Sachs Center for Sustainable Development, The Earth Inst Columbia University 535 West 116th Street, MC 4327 New York, NY 10027 Tel: 212/854-8704 Fax: 212/854-8702 E-Mail: sachs@columbia.edu AB - This paper illustrates the role for macroeconomic policy coordination when interdependent economies are pursuing disinflationary policies. Under flexible exchangerates, policy makers have an incentive to reduce inflation by pursuing contractionary policies that yield a currency appreciation. In a Nash, perfect foresight equilibrium,policy authorities in the model pursue contractionary policies to achieve currency appreciation, but these attempts cancel out, with the result that all countries end up pursuing excessively contractionary policies (relative to asymmetric Pareto optimum). The paper presents these resultsin a two-country, infinite-horizon difference game. ER -