Autore
Kohler, Marion

Titolo
bloc formation in international monetary policy coordination
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1997 - Fascicolo: 31 - Pagina iniziale: 1 - Pagina finale: 74

In a standard framework of international monetary policy games we show that countries will prefer to split up into several coalition blocs of a smaller size rather than forming one big coalition. Depending on the strategic position between the coalitions in an equilibrium there will be either only coalitions of the same size or the 'leading' coalition will be smaller than the 'follower' coalition. A possible application of these results is the formation of currency blocs. Large currency blocs, though Pareto Optimal compared with non-cooperative situations, are not sustainable because there is an incentive for individual countries to stay outside a bloc. However, the formation of several smaller blocs may be the outcome of individually optimal decisions. The result is not dependent on model asymmetries in the underlying trade structures or asymmetric shocks.



Testo completo: http://hdl.handle.net/1814/640

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