Discussion Paper Details

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Title: Global Implications of Self-Orientated National Monetary Rules

Author(s): Maurice Obstfeld and Kenneth Rogoff

Publication Date: June 2001

Keyword(s): international policy coordination, monetary institutions and monetary policy rules

Programme Area(s): International Macroeconomics

Abstract: It is well known that if international linkages are relatively small, the potential gains to international monetary policy coordination are typically quite limited. What if, however, goods and financial markets are tightly linked? Is it then problematic if countries unilaterally design their institutions for monetary stabilization? Are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination? We argue that under plausible assumptions the answer is no. Unless risk aversion is very high, lack of coordination in rule setting is a second-order problem compared to the overall gains from monetary policy stabilization.

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Bibliographic Reference

Obstfeld, M and Rogoff, K. 2001. 'Global Implications of Self-Orientated National Monetary Rules'. London, Centre for Economic Policy Research.