| Description |
1 online resource (67) |
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text file |
| Summary |
In an interconnected world, national economic policies regularly lead to large international spillover effects, which frequently trigger calls for international policy cooperation. However, the premise of successful cooperation is that there is a Pareto inefficiency, i.e. if there is scope to make some nations better off without hurting others. This paper presents a first welfare theorem for open economies that defines an efficient benchmark and spells out the conditions that need to be violated to generate inefficiency and scope for cooperation. These are: (i) policymakers act competitively in the international market, (ii) policymakers have sufficient external policy instruments and (iii) international markets are free of imperfections. Our theorem holds even if each economy suffers from a wide range of domestic market imperfections and targeting problems. We provide examples of current account intervention, monetary policy, fiscal policy, macroprudential policy/capital controls, and exchange rate management and show that the resulting spillovers are Pareto efficient, as long as the three conditions are satisfied. Furthermore, we develop general guidelines for how policy cooperation can improve welfare when the conditions are violated. |
| Local Note |
eBooks on EBSCOhost EBSCO eBook Subscription Academic Collection - North America |
| Subject |
Foreign exchange rates -- Econometric models.
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Foreign exchange rates -- Econometric models. |
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Monetary policy -- Econometric models.
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Monetary policy -- Econometric models. |
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International economic relations -- Econometric models.
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International economic relations -- Econometric models. |
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International economic relations. |
| Genre/Form |
Electronic books.
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| Other Form: |
Print version: Korinek, Anton. Currency Wars or Efficient Spillovers? A General Theory of International Policy Cooperation. Washington, D.C. : International Monetary Fund, ©2017 9781475577549 |
| ISBN |
1475579675 (electronic book) |
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9781475579673 (electronic book) |
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