Do We Really Need a New International Monetary Compact?
NBER Working Paper No. 7864
In recent years, many countries have instituted monetary reforms aimed at improving anti-inflation credibility. Is it a problem, however, that international welfare spillover effects seldom receive much consideration in the design of monetary reforms? Surprisingly, the answer may be no. Under plausible conditions, as domestic rules improve and international financial markets become more complete, the Nash and cooperative monetary rule setting games converge. We base our analysis on a utility-theoretic sticky-wage (new open economy macroeconomics) model; the question we pose simply could not have been adequately formulated using earlier models of monetary cooperation.
Document Object Identifier (DOI): 10.3386/w7864
Published: Obstfeld, Maurice and Kenneth Rogoff. "Global Implications of Self-Oriented National Monetary Rules." Quarterly Journal of Economics, May 2002.
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