How to manage ﬁnancial shocks : Intra-European vs. international monetary coordination
Cussy, Pascal; Capoen, Fabrice; Creel, Jérôme; Lenoble-Liaud, Hélène (2003), How to manage ﬁnancial shocks : Intra-European vs. international monetary coordination, Journal of Macroeconomics, 25, 4, p. 431-455. http://dx.doi.org/10.1016/j.jmacro.2003.07.002
TypeArticle accepté pour publication ou publié
Journal nameJournal of Macroeconomics
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Abstract (EN)Using a four-country Mundell–Fleming model including portfolio and wealth eﬀects, we explore the question whether some types of policy coordination could improve the outcomes of a ﬁnancial shock like the Asian crisis. Time-consistent equilibria are computed : a Nash equilibrium, a target zone regime and a coalition solution. The best equilibrium for all authori- ties except the US government is the European coalition. Introducing a Stability Pact in Europe does not alter this result. Introducing a Fed less conservative than the ECB or the BoJ provokes a change in US preferences : both authorities give priority to the target zone regime.
Subjects / KeywordsCoordination; Financial crisis; Target zone; Time consistency; Stability pact
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