Global Implications of Self-Orientated National Monetary Rules

40 Pages Posted: 17 Jul 2001

See all articles by Maurice Obstfeld

Maurice Obstfeld

University of California, Berkeley; Peterson Institute for International Economics; National Bureau of Economic Research; Centre for Economic Policy Research

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 2001

Abstract

It is well known that if international linkages are relatively small, the potential gains to international monetary policy coordination are typically quite limited. What if, however, goods and financial markets are tightly linked? Is it then problematic if countries unilaterally design their institutions for monetary stabilization? Are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination? We argue that under plausible assumptions the answer is no. Unless risk aversion is very high, lack of coordination in rule setting is a second-order problem compared to the overall gains from monetary policy stabilization.

Keywords: International policy coordination, monetary policy rules, monetary institutions

JEL Classification: E42, F33, F42

Suggested Citation

Obstfeld, Maurice and Rogoff, Kenneth S., Global Implications of Self-Orientated National Monetary Rules (June 2001). Available at SSRN: https://ssrn.com/abstract=276783

Maurice Obstfeld (Contact Author)

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Kenneth S. Rogoff

Harvard University - Department of Economics ( email )

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