International monetary policy coordination: an evaluation using a large econometric model

Abstract

We examine whether there is a case for coordinating monetary policy reactions across major economies. We undertake stochastic simulations on the National Institute's Global Econometric Model (NiGEM), to evaluate independently set monetary policy where domestic considerations remain the prime objective and we compare outcomes to a regime with a coordinated policy where domestic interest rates react to international conditions. We also demonstrate the asymptotic properties of the stochastic simulations and stress the robustness of our results.