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International Cooperation and Reputation in an Empirical Two-Bloc Model

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  • Currie, David
  • Levine, Paul L
  • Vidalis, Nic

Abstract

This paper examines three questions concerning the international coordination of macroeconomic policy. First it examines whether it is advantageous for governments to cooperate in the determination of monetary and fiscal policies. Second it asks whether it is helpful for governments to establish reputations vis-a-vis their private sectors. Finally it examines the sustainability of cooperative and reputational policies. These questions are addressed using Minilink, an empirical two-bloc model derived from the OECD interlink model. The main results of the analysis may be summarised as follows. To realize the gains from international cooperation requires reputation; and to realize the gains from reputation requires cooperation. Moreover, cooperative policies with reputation are found to be sustainable; and the joint gains from cooperation and reputation are found to be considerable.

Suggested Citation

  • Currie, David & Levine, Paul L & Vidalis, Nic, 1987. "International Cooperation and Reputation in an Empirical Two-Bloc Model," CEPR Discussion Papers 198, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:198
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    Cited by:

    1. Guglielmo Caporale & Michael Chui & Stephen Hall & Brian Henry, 2003. "Evaluating the Gains to Cooperation in the G-3," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(4), pages 337-356, December.
    2. Michael T. Belongia, 1988. "Prospects for international policy coordination: some lessons from the EMS," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 19-29.
    3. Miller, Marcus & Salmon, Mark, 1990. "When does coordination pay?," Journal of Economic Dynamics and Control, Elsevier, vol. 14(3-4), pages 553-569, October.
    4. Andrew Brociner, 1993. "L'Union monétaire européenne : une revue de la littérature théorique," Revue de l'OFCE, Programme National Persée, vol. 43(1), pages 349-363.
    5. Thomas Willett, 1999. "Developments in the Political Economy of Policy Coordination," Open Economies Review, Springer, vol. 10(2), pages 221-253, May.
    6. McNelis, Paul D. & Asilis, Carlos M., 2002. "Macroeconomic policy games and asset-price volatility in the EMS: a linear quadratic control analysis of France, Germany, Italy and Spain," Economic Modelling, Elsevier, vol. 19(1), pages 1-24, January.
    7. Fabrice Capoën & Pierre Villa, 1997. "Internal and External Policy Coordination: a Dynamic Analysis," Working Papers 1997-15, CEPII research center.
    8. McNelis, Paul D. & Asilis, Carlos M., 1995. "Monetary policy games with broad money targets a linear quadratic control analysis of the U.S. and Japan," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1091-1111.
    9. Jacob A. Frenkel & Morris Goldstein & Paul R. Masson, 2017. "The Rationale for, and Effects of, International Economic Policy Coordination," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 7, pages 241-298, World Scientific Publishing Co. Pte. Ltd..
    10. Peter Mooslechner & Martin Schuerz, 1999. "International Macroeconomic Policy Coordination: Any Lessons for EMU? A Selective Survey of the Literature," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(3), pages 171-199, September.
    11. Matthew B. Canzoneri & Hali J. Edison, 1990. "A new interpretation of the coordination problem and its empirical significance," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 399-435.
    12. Andrew Hughes-Hallett & Patrick Minford, 1990. "Target zones and exchange rate management: A stability analysis of the European Monetary System," Open Economies Review, Springer, vol. 1(2), pages 175-200, June.

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