International monetary policy coordination in a new Keynesian model with NICE features

International audienceThis paper provides a static two country new Keynesian model to teach two related questions in international macroeconomics: the international transmission of unilateral monetary policy decisions and the gains coming from the coordination monetary rules. We concentrate on “normal times” and use a thoroughly graphical approach to analyze the questions at hands. In this setting monetary policy is conducted using interest rates rules and economic integration between nations does not necessarily create the case for the coordination of monetary policy. In particular, we show that the conduct of optimal national monetary policies does not make any difference with the coordination of national policies, as this creates a situation where the international monetary system operates “Near an International Cooperative Equilibrium”