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Title:Policy instrument choice and non-coordinated monetary in interdependent economies PDF Logo
Authors:Lombardo, Giovanni
Sutherland, Alan
Issue Date:2004
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,03
Abstract:Non-coordinated monetary policy is analysed in a stochastic two-country general equilibrium model. Non-coordinated equilibria are compared in two cases: one where policy is set in terms of state-contingent money supply rules and one where policy is set in terms of state-contingent nominal interest rate rules. In general the non-coordinated equilibrium differs between the two types of policy rule but a number of special cases are identified where the equilibria are identical. The endogenous choice of policy instrument is analysed and the Nash equilibrium in the choice of policy instrument is shown to depend on the interest elasticity of money demand.
Subjects:Monetary policy
money supply rules
interest rate rules
JEL:E52
F42
E58
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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