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Implementing international monetary cooperation through inflation targeting

Benigno, Gianluca and Benigno, Pierpaolo (2008) Implementing international monetary cooperation through inflation targeting. Macroeconomic Dynamics, 12 (s1). pp. 45-59. ISSN 1365-1005

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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.

Item Type: Article
Official URL: http://journals.cambridge.org/action/login?session...
Additional Information: © 2008 Cambridge University Press
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 14 Apr 2011 15:28
URL: http://eprints.lse.ac.uk/35633/

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