The zero lower bound and monetary policy in a global economy: A simple analytical investigation

Ippei Fujiwara*, Nao Sudo, Yuki Teranishi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

How should monetary policy cooperation be designed when more than one country is simultaneously facing zero lower bounds on nominal interest rates? To answer this question, we examine monetary policy cooperation with both optimal discretion and commitment policies in a two-country model. We reach the following conclusions. Under discretion, monetary policy cooperation is characterized by the intertemporal elasticity of substitution (IES), a key parameter measuring international spillovers, and no history dependency. On the other hand, under commitment, monetary policy featureshistory dependence with international spillover effects.

Original languageEnglish
Pages (from-to)103-134
Number of pages32
JournalInternational Journal of Central Banking
Volume6
Issue number1
Publication statusPublished - Mar 2010
Externally publishedYes

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