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FW: Monetary and Fiscal Strategies in the World Economy_9

Tham khảo tài liệu 'fw: monetary and fiscal strategies in the world economy_9', tài chính - ngân hàng, ngân hàng - tín dụng phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 2. Monetary and Fiscal Policies in Europe and America 283 2.2. Monetary and Fiscal Cooperation between Europe and America The policy makers are the European central bank the American central bank the European government and the American government. The targets of policy cooperation are zero inflation zero unemployment and a zero structural deficit in each of the regions. The instruments of policy cooperation are European money supply American money supply European government purchases and American government purchases. We assume that the policy makers agree on a common loss function. The amount of loss depends on inflation unemployment and the structural deficit in each of the regions. The policy makers set European money supply American money supply European government purchases and American government purchases so as to minimize the common loss. The cooperative equilibrium is determined by the first-order conditions for a minimum loss. It yields the optimum levels of European money supply American money supply European government purchases and American government purchases. Given a demand shock in Europe policy cooperation achieves zero inflation zero unemployment and a zero structural deficit in each of the regions. Given a supply shock in Europe policy cooperation has no effect on inflation and unemployment in Europe. And what is more it produces a zero structural deficit there. Given a mixed shock in Europe policy cooperation lowers inflation in Europe. On the other hand it raises unemployment there. And what is more it produces a zero structural deficit. Given another type of mixed shock in Europe policy cooperation lowers unemployment in Europe. On the other hand it raises inflation there. And what is more it produces a zero structural deficit. As an important result the system of monetary and fiscal cooperation seems to be superior to the system of monetary and fiscal interaction. Symbols A autonomous term A1 autonomous term for Europe A2 autonomous term .