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| Author: | Lane, T. D. |
| Title: | National sovereignty and international monetary order |
| Journal: | Journal of International Economics
1990 : NOV, VOL. 29:3/4, p. 351-368 |
| Index terms: | INTERNATIONAL MONETARY SYSTEM OPEN ECONOMY RATIONAL EXPECTATIONS ECONOMIC SYSTEMS POLITICS GOVERNMENT PARETO LAW EQUILIBRIUM ANALYSIS |
| Language: | eng |
| Abstract: | The purpose of the paper is to explore countries' optimal choice of exchange-rate rule. The problem is analysed in the context of a simple three-country rational expectations open-economy model. It is shown that the interaction of different countries' choice 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 choice is possible. A move to a Pareto-superior Nash equilibrium would meet with the agreement of all countries and there would be no incentive for any country to deviate. |
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