|
|
|
|
||||
|
||||
Monetary Cohabitation in EuropeTorsten PerssonStockholm University - Institute for International Economic Studies (IIES); London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) Guido TabelliniUniversity of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); Centre for Economic Policy Research (CEPR); Center for Economic Studies and Ifo Institute for Economic Research (CESifo); Bocconi University - Department of Economics April 1996 NBER Working Paper No. w5532 Abstract: How can monetary policy in stage III of European Monetary Union be coordinated between the `ins' and the `outs'? This paper compares alternative institutional mechanisms, and concludes that a generalized system of inflation targets at the European level has several merits. It strengthens domestic credibility of monetary policy. It rules out deliberate attempts to gain competitiveness through devaluations. It forces monetary policy to respond automatically to various macroeconomic shocks which is stabilizing for the real exchange rate. It distributes these shocks symmetrically across countries. On the basis of a simple theoretical model of policy coordination, the paper shows that a system of inflation targets approximates an optimal policy of international cooperation. Preliminary empirical evidence supports these theoretical results.
Number of Pages in PDF File: 36 working papers seriesDate posted: July 18, 1996Suggested CitationContact Information
|
|
||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo2 in 0.625 seconds
