01991cas a2200241 a 4500 AALejournalIMF002082 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451852325 1018-5941 BD-DhAAL BD-DhAAL Kawai, Masahiro. Optimal and Sustainable Exchange Rate Regimes : A Simple Game-Theoretic Approach / Masahiro Kawai. Washington, D.C. : International Monetary Fund, 1992. 1 online resource (43 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper examines the question of how to design an optimal and sustainable exchange rate regime in a world economy of two interdependent countries. It develops a Barro-Gordon type two-country model and compares noncooperative equilibria under different assumptions of monetary policy credibility and different exchange rate regimes. Using a two-stage game approach to the strategic choice of policy instruments, it identifies optimal (in a Pare to sense) and sustainable (self-enforcing) exchange rate regimes. The theoretical results indicate that the choice of such regimes depends fundamentally on the credibility of monetary policy commitments by the two countries' authorities. The nature of shocks to the economies and the substitutability between goods produced in the two countries also play some role. International coordination on instrument choice is necessary to design optimal and sustainable exchange rate regimes. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1992/100 Full text available on IMF http://elibrary.imf.org/view/journals/001/1992/100/001.1992.issue-100-en.xml IMF e-Library