Monetary policy cooperation and multiple equilibria

We consider international monetary policy regimes in a world of two identical economies characterized by unemployment persistence. In the non-cooperative regime, Markov-perfect Nash equilibrium policies are generally not unique. Furthermore, policies may be asymmetric in this otherwise symmetric model. Monetary policy cooperation also exhibits multiple equilibria but, these are fewer and always symmetric. Cooperation may be counterproductive or beneficial for either country depending upon the initial non-cooperative and resulting cooperative outcome. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classification: E52; E61; F42.