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The elusive gains from nationally oriented monetary policy
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0034-6527; 1467-937X
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The review of economic studies, 2025, Vol. 92, No. 2, pp. 873-908
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BODENSTEIN, Martin, CORSETTI, Giancarlo, GUERRIERI, Luca, The elusive gains from nationally oriented monetary policy, The review of economic studies, 2025, Vol. 92, No. 2, pp. 873-908 - https://hdl.handle.net/1814/93990
Abstract
The gains from monetary policy cooperation depend on real and financial distortions in the economy and evolve dynamically with prevailing economic conditions. We show that, with international trade in assets, these gains are driven by asymmetric cross-border developments in productivity and savings, and can reach multiples of the cost of economic fluctuations. When financial flows are restricted to nonstate-contingent bonds, the gains from cooperation grow with the size of global imbalances, i.e. net-foreign-asset positions.
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Published online: 24 April 2024
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Published version of EUI RSC WP 2023/25