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Fixed exchange rates and non-cooperative monetary policies

Author

Listed:
  • Miguel Sebastián

    (Universidad Complutense de Madrid, Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa))

Abstract

This paper presents a model which in a world with fixed exchange rates and absence of capital controls non-cooperative game yield multiple Nash equilibria with nonoptimal allocations, when we introduce regimes as strategies for the players. In general there is a unique Perfect Equilibrium for the game with both strategies. The sub-optimality of the non-cooperative solution provides scope for international coordination, in the form of joint choice of non-inflationary polices that dominate the Nash equilibria allocations.

Suggested Citation

  • Miguel Sebastián, 1987. "Fixed exchange rates and non-cooperative monetary policies," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 87-14, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    • Handle: RePEc:ucm:doctra:87-14
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