Sustainable international monetary policy cooperation

Ippei Fujiwara, Timothy Kam, Takeki Sunakawa

    Research output: Contribution to journalArticlepeer-review


    We provide new insight on international monetary policy cooperation in a familiar twocountry setting. A country facing a relatively more volatile markup shock has an incentive to deviate from an assumed Cooperation regime to a Non-cooperation regime. A similar result obtains if countries differ in size, have non-unitary elasticity of substitution between domestic and foreign goods, and have different degrees of trade openness (home bias in consumption). This motivates our study of an endogenous, history-dependent Sustainable Cooperation regime. Its history-contingent welfare redistributions are supported by incentive-compatible variations in resource transfers, through the terms of trade (or net exports). Such an endogenous cooperative solution may also provide a theoretical rationale for perceived occasional cooperation between national central banks in reality.
    Original languageEnglish
    JournalJournal of Economic Dynamics and Control
    Publication statusPublished - 2019


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