Monetary Policy in a Multi-Polar World

Abstract

This paper focuses on monetary policy in the context of a global economy with two or more large countries. It attempts to deal with several questions raised by the domestic ineffectiveness and unintended global results of the United States' policy of quantitative easing. Our analysis shows that in a world of truly free capital mobility, the effects of monetary policy may be different - typically weaker - than in a closed economy. Restrictions on free capital may therefore be advantageous.