Chapter 23 Economic interdependence and coordination of economic policies

Currency war or international policy coordination?

“…This point is well known courtesy of the now large literature on international policy coordination (Hamada 1976, Cooper 1984, Meyer, Doyle, Gagnon and Henderson 2002. If other distortions are present, non-pecuniary spillovers result, and countries are individually or collectively large enough for their policies to affect one another, then unilateral actions and reactions may not yield the optimal outcome.…”

Japanese monetary policy and international spillovers

“…5 While from a pareto-optimality welfare standpoint, the postive-spillover case (the equilibrium depicted in Figure 1(b)) is no better than the negative-spillover case (the equilibrium depicted in Figure 1(a)), in real world international relations, it would be better if expansionary monetary policies abroad are accompanied not only by a depreciating foreign currency, but also expanding foreign GDP and asset (bond and stock) prices, so that foreign money growth will have positive spillovers, at least in the longer run.…”

“…See Cooper (1985) for a more formal analysis of this "positive spillover" case of national monetary policies, where a proposal is made for international monetary coordination.…”

Monetary policies in interdependent economies: an open economy explanation for base drift and price-level non-trend-stationarities

“…For purposes of this paper, however, it is assumed that policy strategies are not coordinated, perhaps because of a lack of trust or an inherent public sentiment against coordinating policies in one or both of the countries (see Cooper, 1985, for a discussion of these issues).…”