NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Leadership and Cooperation in the European Monetary System: A Simulation Approach

Nouriel Roubini

NBER Working Paper No. 3044
Issued in July 1989
NBER Program(s):   ITI   IFM

To assess the importance of economic interdependence and the potential gains from policy coordination in the European area, this paper analyzes the international transmission of policies and disturbances in a rational expectation dynamic general equilibrium simulation model of the work economy, and applies the analysis to the study of the European Monetary System. International spillover effects and potential gains from coordination appear to be small under the assumption of flexible exchange rates in the European area. The implications of a fixed rate EMS with German leadership are compared with those of a cooperative fixed exchange rate regime. Finally, capital controls under fixed rates fails to insure policy autonomy and insulation from external disturbances for the countries restricting the capital movements.

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Document Object Identifier (DOI): 10.3386/w3044

Published: Journal of Policy Modeling, April 1991.

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