Abstract:
This paper explores the theoretical logic of monetary policy spillover effect, and analyses the welfare effects of international cooperation in monetary policy based on an New Keynesian dynamic model of two countries in an open economy. The results show the asymmetry in the distribution of the benefits related to cooperation. Big countries may benefit from cooperation because of their dominant position in cooperation. Hence it’s a good choice for China, an increasingly open economic giant to develop the international cooperation in monetary policy.
