Price Stability as a Nash Equilibrium in Monetary Open-Economy Models

A two-country dynamic general-equilibrium model with imperfect competition and price stickiness is considered. This work shows the conditions under which price stability can implement the flexible-price allocation as a Nash equilibrium. This is possible if and only if both countries maintain a certain positive degree of monopolistic competition. In such equilibrium, the monetary policymakers have no incentive to surprise price setters ex post.

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Year of publication:	2001-04
Authors:	Benigno, Gianluca ; Benigno, Pierpaolo
Institutions:	C.E.P.R. Discussion Papers
Subject:	Nash Equilibrium \| Open Economy \| Optimal Monetary Policy \| Price Stability

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Extent:	application/pdf
Series:	CEPR Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 2757
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; F41 - Open Economy Macroeconomics
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005136428