Hostname: page-component-7dd5485656-g8tfn Total loading time: 0 Render date: 2025-10-31T10:51:27.361Z Has data issue: false hasContentIssue false
  • English
  • Français

IMPLEMENTING INTERNATIONAL MONETARY COOPERATION THROUGH INFLATION TARGETING

Published online by Cambridge University Press:  01 April 2008

GIANLUCA BENIGNO  and
PIERPAOLO BENIGNO
GIANLUCA BENIGNO*
Affiliation:
London School of Economics
PIERPAOLO BENIGNO
Affiliation:
Luiss Guido Carli
*
Address correspondence to: Gianluca Benigno, Department of Economics and CEP, London School of Economics, Houghton Street, London WC2A 2AE, United Kingdom; e-mail: g.benigno@lse.ac.uk.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper presents a two-country dynamic general equilibrium model with imperfect competition and nominal price rigidities in which productivity shocks coexist with markup shocks. After analyzing the features of the optimal cooperative solution, we show that this allocation can be implemented in a strategic context through inflation-targeting regimes. Under these regimes, each monetary authority minimizes a quadratic loss function that targets only domestic targets, namely, GDP inflation and the output gap.

Keywords

International Monetary CooperationInflation Targeting

Information

Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 12 , Supplement S1: Dynamic Macroeconomic Theory , April 2008 , pp. 45 - 59
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

Aoki, Kosuke (2001) Optimal monetary policy responses to relative-price changes. Journal of Monetary Economics 48, 55–80.CrossRefGoogle Scholar
Benigno, Gianluca and Benigno, Pierpaolo (2002) Implementing Monetary Cooperation Through Inflation Targeting. CEPR discussion paper 3226.Google Scholar
Benigno, Gianluca and Benigno, Pierpaolo (2003) Price stability in open economies. Review of Economic Studies 70, 743–764.CrossRefGoogle Scholar
Benigno, Gianluca and Benigno, Pierpaolo (2005) Designing targeting rules for international monetary policy cooperation. Journal of Monetary Economics 53 (3), 473–506.CrossRefGoogle Scholar
Benigno, Pierpaolo (2004) Optimal monetary policy in a currency area. Journal of International Economics 63 (2), 293–320.Google Scholar
Blinder, Alan S. (1997) What central bankers could learn from academics—and vice versa. Journal of Economic Perspectives 11 (2), 3–19.Google Scholar
Canzoneri, Matthew, Cumby, Robert E., and Diba, Behzad T. (2005) The need for international policy coordination: What's old, what's new, what's yet to come? Journal of International Economics 66 (2)363–384.Google Scholar
Canzoneri, Matthew and Henderson, Dale (1991) Monetary policy in interdependent economies: A game-theoretic approach. Cambridge, MA: MIT Press.Google Scholar
Chari, V.V., Kehoe, Patrick J., and McGrattan, Ellen R. (2002) Can sticky prices models generate volatile and persistent real exchange rates? Review of Economic Studies 69, 533–563.CrossRefGoogle Scholar
Clarida, Richard, Galí, Jordi, and Gertler, Mark (2002) A simple framework for international monetary policy analysis. Journal of Monetary Economics 49, 879–904.Google Scholar
Corsetti, Giancarlo and Pesenti, Paolo (2005) The international dimension of optimal monetary policy. Journal of Monetary Economics 52 (2), 281–305.CrossRefGoogle Scholar
Currie, David and Levine, Paul (1993) Rules, reputation and macroeconomics policy coordination. Cambridge, MA: Cambridge University Press.Google Scholar
Devereux, Michael B. and Engel, Charles (2003) Monetary policy in the open economy revised: Price setting and exchange rate flexibility. Review of Economic Studies 70, 765–784.CrossRefGoogle Scholar
Jensen, Henrik (2002) Targeting nominal income growth or inflation? American Economic Review 92, 928–956.Google Scholar
Obstfeld, Maurice and Rogoff, Kenneth (1998) Risk and Exchange Rates. NBER working paper 6694.CrossRefGoogle Scholar
Obstfeld, Maurice and Rogoff, Kenneth (2002) Global implications of self-oriented national monetary rules. Quarterly Journal of Economics 117 (2), 503–535.CrossRefGoogle Scholar
Persson, Torsten and Tabellini, Guido (1996) Monetary cohabitation in Europe. American Economic Review, Papers and Proceedings 86, 111–116.Google Scholar
Rogoff, Kenneth (1985) The optimal degree of commitment to an intermediate monetary target. Quarterly Journal of Economics 100, 1169–1190.Google Scholar
Sutherland, Alan (2005) Cost-push shocks and monetary policy in open economies. Oxford Economic Papers 57, 1–33.CrossRefGoogle Scholar
Svensson, Lars (2000) Open-economy inflation targeting. Journal of International Economics 50, 155–183.Google Scholar
Svensson, Lars (2002) Inflation targeting: Should it be modeled as an instrument rule or a targeting rule? European Economic Review 46, 771–780.CrossRefGoogle Scholar
Woodford, Michael (1999) Optimal Monetary Policy Inertia. NBER working paper 7261.CrossRefGoogle Scholar
Woodford, Michael (2003) Interest and prices: Foundations of a theory of monetary policy. Princeton, NJ: Princeton University Press.Google Scholar