Leadership and Cooperation in the European Monetary System: a Simulation Approach

44 Pages Posted: 14 Apr 2007

See all articles by Nouriel Roubini

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 1989

Abstract

To assess the importance of economic interdependence and the potential gains from policy coordination in the European area, this paper analyzes the international transmission of policies and disturbances in a rational expectation dynamic general equilibrium simulation model of the work economy, and applies the analysis to the study of the European Monetary System. International spillover effects and potential gains from coordination appear to be small under the assumption of flexible exchange rates in the European area. The implications of a fixed rate EMS with German leadership are compared with those of a cooperative fixed exchange rate regime. Finally, capital controls under fixed rates fails to insure policy autonomy and insulation from external disturbances for the countries restricting the capital movements.

Suggested Citation

Roubini, Nouriel, Leadership and Cooperation in the European Monetary System: a Simulation Approach (July 1989). NBER Working Paper No. w3044. Available at SSRN: https://ssrn.com/abstract=979946

Nouriel Roubini (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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