Interdépendance et coopération : les leçons d'une maquette

Abstract

The need for economic policy coordination is particularly great in Europe given both the strong interdependence between European countries and the multiplicity of policymakers. With a two-country model, in which the countries can differ in their propensity to inflate or in their economic policy objectives we show that if each country chooses autonomously its economic policy, the world economic situation is non- optimal. Each country tries to export its inflation or its deficit on current account, which globally is impossible. Economic policy coordination improves the situation of both countries. This coordination is more fruitful when the countries have the same economic policy objectives, on account of the costly competitive exchange rate policies that they would otherwise pursue. But negociating for coordination is not easy, so rules such as those of the EMS are more desirable. We show, in our model, that the EMS leads to an improvement in comparison with the non-cooperative equilibrium, without being a perfect substitute for cooperation.