Autore
Kohler, Marion

Titolo
Coalitions in international monetary policy games
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1996 - Fascicolo: 7 - Pagina iniziale: 1 - Pagina finale: 35

A well-known result from the analysis of monetary policy coordination of two countries is that coordination of the two policies pareto-dominates the outcome of the non-cooperative game. Hence, both countries will always have an incentive to form a Union when it is ensured that the other country joins it as well. When analyzing coalition formation in international monetary policy coordination we have to consider at least three countries. We show in a n-country (symmetric) framework that the two-country result cannot be extended straightforwardly. In fact, the coalition formation might stop when three countries are in the coalition because it is then better for an individual country not to join the coalition. This result highlights the fact that the coalition formation process itself has positive spillovers for the countries outside through reducing the negative externalities created by non-coordinated policies. W hen there are three countries in the coalition it is better for a country outside to play an optimal response to the coalition’s policy than to reduce the remaining externalities by joining the coalition.



Testo completo: http://hdl.handle.net/1814/578

Esportazione dati in Refworks (solo per utenti abilitati)