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- Title
IMPLEMENTING INTERNATIONAL MONETARY COOPERATION THROUGH INFLATION TARGETING.
- Authors
BENIGNO, GIANLUCA; BENIGNO, PIERPAOLO
- Abstract
This paper presents a two-country dynamic general equilibrium model with imperfect competition and nominal price rigidities in which productivity shocks coexist with markup shocks. After analyzing the features of the optimal cooperative solution, we show that this allocation can be implemented in a strategic context through inflation-targeting regimes. Under these regimes, each monetary authority minimizes a quadratic loss function that targets only domestic targets, namely, GDP inflation and the output gap.
- Subjects
INFLATION targeting; MONETARY policy; INTERNATIONAL cooperation; GROSS domestic product; PRICE markup; TRANSMISSION mechanism (Monetary policy); GENERAL equilibrium theory (Economics); ECONOMICS
- Publication
Macroeconomic Dynamics, 2008, Vol 12, Issue S1, p45
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100507070174