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The Elusive Gains from Nationally-Oriented Monetary Policy

Author

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  • Corsetti, Giancarlo
  • Bodenstein, Martin
  • Guerrieri, Luca

Abstract

The consensus in the recent literature is that the gains from international monetary cooperation are negligible, and so are the costs of a breakdown in cooperation. However, when assessed conditionally on empirically-relevant dynamic developments of the economy, the welfare cost of moving away from regimes of explicit or implicit cooperation may rise to multiple times the cost of economic fluctuations. In economies with incomplete markets, the incentives to act non-cooperatively are driven by the emergence of global imbalances, i.e., large net-foreign-asset positions; and, in economies with complete markets, by divergent real wages.

Suggested Citation

  • Corsetti, Giancarlo & Bodenstein, Martin & Guerrieri, Luca, 2020. "The Elusive Gains from Nationally-Oriented Monetary Policy," CEPR Discussion Papers 14359, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14359
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    Cited by:

    1. Luca Fornaro & Federica Romei, 2022. "Monetary policy during unbalanced global recoveries," Economics Working Papers 1814, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Hefeker, Carsten, 2022. "Policy coordination under model disagreement and asymmetric shocks," Economic Modelling, Elsevier, vol. 114(C).
    3. Caldara, Dario & Ferrante, Francesco & Iacoviello, Matteo & Prestipino, Andrea & Queralto, Albert, 2024. "The international spillovers of synchronous monetary tightening," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 127-152.

    More about this item

    Keywords

    Monetary policy cooperation; Global imbalances; Open-loop nash games;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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