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International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model.

Frankel, Jeffrey A and Rockett, Katharine E (1988) 'International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model.' American Economic Review, 78 (3).

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Abstract

The authors relax the assumption of the literature on international coordination that policymakers know the true model. T wo countries will still be able to agree on a cooperative policy pack age that each believes will improve the objective function relative t o the Nash noncooperative solution. However, the bargaining solution may move the target variables in the wrong direction. These points ar e illustrated with monetary and fiscal multipliers taken from simulat ions of ten leading econometric models. Out of 1,000 possible combina tions of models that could represent U.S. beliefs, non-U.S. beliefs, and the true model, monetary coordination improves U.S. welfare in on ly 546 cases. Copyright 1988 by American Economic Association.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 12 Jul 2012 11:43
Last Modified: 17 Aug 2017 18:11
URI: http://repository.essex.ac.uk/id/eprint/2843

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