... to minimize the loss, given the inflation functions, the M. Carlberg, Monetary and Fiscal Strategies in the World Economy, 217deficit in Europe, and a zero structural deficit in America. The ... shock in Europe, policy interaction lowers inflation in Europe. On the other hand, it raises unemployment and the structural deficit there. Given another type of mixed shock in Europe, policy interaction ... zero. Then policy interaction reduces the loss of the European central bank from 36 to 18 units. Correspondingly, it reduces the loss of the American central bank from 36 to 18 units. On the other...