EXCHANGE RATES AND INFLATION TARGETING IN THE CONTEXT OF INTERNATIONAL MACROECONOMIC COORDINATION

Abstract

Annotation This paper deals with international macroeconomic coordination
and its stabilization within a conference framework: Financial Aspects of Rebal-
ancing the Global Economy. The optimal monetary policy rule for three types of
equilibria: macroeconomic coordination, Nash and Stackelberg, using parameters
that reflect the relative size and degree of openness of the economies, have been
compared. This paper confirms that macroeconomic coordination policy is better
than non-coordination rules, and it is a starting point for a promising research
agenda.
Key words Macroeconomic coordination, open economy, inflation targeting,
Nash equilibrium, Stackelberg equilibrium, monetary policy rules.