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A Two-Country Analysis of International Targeting of Nominal GNP

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  • Frankel, Jeffrey A.
  • Funke, Norbert
Abstract
The paper starts by reviewing three sorts of obstacles to successful coordination: the difficulties of, respectively, compliance, credibility, and certainty. It is argued that nominal-GNP-targeting may have a good chance of overcoming such obstacles. A two-county model is used to evaluate an internationally coordinated version of nominal GNP-targeting in the presence of domestic and/or foreign shocks to supply, money demand, and goods demand. In this simple framework nominal GNP-targeting comes out fairly promising, although it does not dominate alternative regimes (including global monetary targeting, global price rules or discretionary policy) under all circumstances. Simulation results based on the McKibbin-Sachs Global Model are in line with the theoretical findings.

Suggested Citation

  • Frankel, Jeffrey A. & Funke, Norbert, 1994. "A Two-Country Analysis of International Targeting of Nominal GNP," Center for International and Development Economics Research (CIDER) Working Papers 233377, University of California-Berkeley, Department of Economics.
    • Handle: RePEc:ags:ucbewp:233377
    DOI: 10.22004/ag.econ.233377
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    Cited by:

    1. Maurice Obstfeld, 1993. "International Capital Mobility in the 1990s," NBER Working Papers 4534, National Bureau of Economic Research, Inc.
    2. Stein, Ernesto H. & Streb, Jorge M., 1998. "Political stabilization cycles in high-inflation economies," Journal of Development Economics, Elsevier, vol. 56(1), pages 159-180, June.
    3. Jeffrey A. Frankel, 1993. "Monetary regime choices for a semi-open country," Pacific Basin Working Paper Series 93-02, Federal Reserve Bank of San Francisco.
    4. Frankel, Jeffrey A. & Funke, Norbert, 1994. "A Two-Country Analysis of International Targeting of Nominal GNP," Center for International and Development Economics Research (CIDER) Working Papers 233377, University of California-Berkeley, Department of Economics.
    5. Pranab Bardhan, 1998. "The Contributions of Endogenous Growth Theory to the Analysis of Development Problems: An Assessment," Palgrave Macmillan Books, in: Fabrizio Coricelli & Massimo di Matteo & Frank Hahn (ed.), New Theories in Growth and Development, chapter 5, pages 97-110, Palgrave Macmillan.
    6. Sylvia Staudinger, 2000. "Inflation Targeting versus Nominal Income Targeting," CESifo Working Paper Series 301, CESifo.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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