NATIONAL SOVEREIGNTY AND INTERNATIONAL MONETARY ORDER

The choice of exchange-rate regime is examined in a three-country model in which the regime chosen by one country affects other countries' opportunities. It is shown that the interaction of different countries' choices of exchange-rate regime may be characterized by either strategic complementarity or strategic substitution. As a result, if each country pursues its national interest independently, either nonexistence or nonuniqueness of equilibrium among different countries' regime choices is possible. The model therefore provides an alternative rationale for international policy coordination. © 1990.