Global Implications of Self-Oriented National Monetary Rules

By M. Obstfeld, Kenneth S. Rogoff. 2001

504 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d4854b6ece111c65374f3181b4703e1c43e6d5a2

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Citations in the corpus

Fiscal and Monetary Rules for a Currency Union (2009, background): “Definition 1 An imperfectly competitive equilibrium is a sequence of stochastic processes Xt ≡ {CW,t, Yi,t, pi,t, ∆i,t, Πi,t, Ki,t, ki,t, Fi,t, fi,t, Bi,t/Pt, bi,t, Tt, Πt} that satisfy conditions [26]-[38] plus the definition of bi,t, given fiscal and monetary policies Pt ≡ {τ i,t, Rt}, exogenous p”
On Constraining Fiscal Policy Discretion in EMU (2003, methodology): “7 By using data for a large sample of countries, recent works by Persson (2001) and Shi and Svensson (2001) present convincing evidence in favour of an opportunistic political business cycle.”
Understanding the Evolution of World Business Cycles (2005, unknown): “Recent research by Obstfeld and Rogoff (2002) provides results quite different than those in the previous literature.”
Monetary and Fiscal Interactions in Open Economies (2004, background): “In the context of stochastic open economy models, contributions to the modern theory of optimal monetary policy can be found in Obstfeld and Rogoff (1995, 1998, 2000, 2002), Corsetti and Pesenti (2001a,b), Devereux and Engel (2000), Benigno and Benigno (2001), Clarida et al. (2001) and Sutherland…”
Financial Globalization and Monetary Policy (2007, background): “Benigno (2001) and Obstfeld and Rogoff (2002) show that the absence of full international risk-sharing may interact with the inefficiency arising from sticky prices, so that price stability may not constitute the unique optimal goal of monetary policy3.”
Incomplete Pass-Through and the Welfare Effects of Exchange Rate Variability (2005, unknown): “ = E · Ã μ logC ¡ K 1 Y 1 1 ¶ + (1¡ Ã) μ logC ¡ K 1 Y 1 2 ¶ ̧ (30)”
Price Stability in Open Economies (2003, background): “Instead, under the above assumptions, (21) implies that, given the zero producer in°ation strategy in country F , there is no trade-o® between stabilising the Home producer in°ation and the world output gap.”
Global implications of national unconventional policies (2013, result): “However, the resulting welfare losses relative to cooperation are not generally very large for financial shocks, in line with standard results in the literature for other business cycle shocks (see e.g. Obstfeld and Rogoff (2002)).”
HAVE NATIONAL BUSINESS CYCLES BECOME MORE SYNCHRONIZED (2003, background): “As Obstfeld and Rogoff (2002) have argued, there is probably little gain from policy coordination beyond this, provided that central banks have the right policy objectives.”
Self-oriented monetary policy, global financial markets and excess volatility of international capital flows (2015, unknown): “This criticism questions the prevailing view that a ‘self-oriented’ monetary policy based on inflation targeting principles represents an efficient mechanism for the world monetary system (e.g. Obstfeld and Rogoff, 2002), without the need for any cross-country coordination of policies.”
International Channels of Transmission of Monetary Policy and the Mundellian Trilemma (2015, unknown): “As noted by Obstfeld and Rogoff (2000, 2002), Corsetti and Pesenti (2001) and Benigno and Benigno (2003), the optimal monetary policy trades off the stabilization of the output gap and the strengthening of the terms of trade.”