Abstract:We use a two-country New Keynesian model to revisit the issue of counterproductive monetary policy cooperation. By analyzing the optimal commitment, discretionary, and sustainable policies, we show how counterproductive cooperation and governments' commitment ability are linked. The global Friedman rule, whereby both countries always adopt the Friedman rule, maximizes the joint welfare for a wide range of parameters. However, cooperation makes the global Friedman rule unimplementable under discretionary polici… Show more
Set email alert for when this publication receives citations?
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.