Optimal monetary policy rules in a two-country economy with a zero bound on nominal interest rates

► This paper investigates optimal monetary policy rules when two large countries simultaneously face the zero bound. ► Under policy coordination optimal monetary policy rules contain information about domestic and foreign policy rates. ► Such policy rules generally lose the optimality once both countries face the zero bound simultaneously. ► Even in such a situation an interest rate rule that excludes information about domestic and foreign policy rates is still optimal.