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Journal Articles Journal of Macroeconomics Year : 2003

How to Manage Financial Shocks: Intra-European vs. International Monetary Coordination

Abstract

Using a four-country Mundell–Fleming model including portfolio and wealth effects, we explore the question whether some types of policy coordination could improve the outcomes of a financial shock like the Asian crisis. Time-consistent equilibria are computed: a Nash equilibrium, a target zone regime and a coalition solution. The best equilibrium for all authorities except the US government is the European coalition. Introducing a Stability Pact in Europe does not alter this result. Introducing a Fed less conservative than the ECB or the BoJ provokes a change in US preferences: both authorities give priority to the target zone regime.

Dates and versions

hal-03416786 , version 1 (05-11-2021)

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Jérôme Creel, Fabrice Capoen, Pascal Cussy, Hélène Lenoble-Liaud. How to Manage Financial Shocks: Intra-European vs. International Monetary Coordination. Journal of Macroeconomics, 2003, 25 (4), pp.431 - 455. ⟨10.1016/j.jmacro.2003.07.002⟩. ⟨hal-03416786⟩
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