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
The Earth Institute at Columbia University
314 Low Library
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  -