The Effect of International Monetary Policy Coordination and Information Sharing

Abstract

Abstract:

In the process of monetary policy coordination, the information of the economic outlook will have a decisive influence on the choice of the central bank's strategy. In this paper, asymmetric information is introduced into the two-country open economy model, and the effects of different information-sharing strategies and coordination strategies on the volatility of output and inflation are analyzed and compared. The conclusion is:(1) the country with information advantages shall share its economic forecast with the other. In this way, economic shocks can be fully reflected in economic expectations, and output and inflation fluctuation of both countries could be reduced;(2) under the information-sharing strategy, monetary policy coordination can enhance bilateral welfare;(3) when information cannot be fully shared, the condition under which the central bank choose independent monetary policy is given; (4) in most cases, better economic forecasting ability has positive externality. The above conclusions suggest that China's central bank should strengthen the ability of expectation guiding, and actively communicate and cooperate with foreign central banks and research departments.

Key words: new open macro economy, international monetary policy coordination, asymmetric information, expectation guiding

Yang Haizhen, Wang Kaiyang. The Effect of International Monetary Policy Coordination and Information Sharing[J]. , 2019, 31(2): 49-57.

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