TY - GEN A1 - Berger, Wolfram T1 - International Policy Coordination and Simple Monetary Policy Rules T2 - Swiss journal of economics and statistics N2 - This paper studies monetary policy in an optimizing two-country model. We suppose a two-step production process that is associated with vertical trade. Prices of final consumption goods are sticky and pass-through can be incomplete. Monetary authorities should respond to both home and foreign shocks in this set-up.Which simple, i.e. non-optimal, targeting rule best supports the welfare maximizing policy hinges critically on the degree of the cross-country interdependence in production and the relative importance of productivity and cost-push shocks. We argue that the relative volatility of productivity and cost-push shocks determines whether the monetary authority should follow a price targeting rulewhereas the degree of vertical integration determines which simple price targeting rule (producer or consumer price index targeting) is best. KW - policy coordination KW - policy rule KW - consumer price targeting KW - producer price targeting KW - monetary targeting Y1 - 2010 SN - 0303-9692 VL - 146 IS - 2 SP - 451 EP - 479 ER -