3 cups all- purpose flour
½ cup powdered sugar
1 t baking powder
¼ t salt
1 cup butter, cut into small pieces
6 to 7 T ice water
½ pkg (14 oz) caramel candies, unwrapped
2 T milk
½ cup flaked coconut
1 large egg
1 T water
Place flour, powdered sugar, baking powder and salt in large bowl; stir to combine. Cut butter into flour mixture with pastry blender or 2 knives until mixture forms peas sized pieces. Add water, 1 T at a time; toss with fork until mixture holds together. Form dough into 2 discs; wrap in plastic wrap and refrigerate 30 minutes or until firm.
Meanwhile, melt caramels and milk in medium saucepan over low heat, stirring constantly; stir in coconut with spoon. Remove from heat; cool.
Working with 1 disc at a time, unwrap dough and place on lightly floured surface. roll out dough with lightly floured rolling pin to 1/8" thickness.
Cut dough with 3" round cookie cutter. Gently press dough trimmings together; reroll and cut out more cookies.
Preheat oven to 400°F. Grease cookie sheets; set aside.
Beat egg and water in cup.
Place ½ t caramel mixture in center of each dough round. Moisten edge of dough round with egg mixture. Fold dough in half; press edges firmly to seal in filling. Press edge with fork.
Place cookies on prepared cookie sheets; brush with egg mixture. Cut 3 slashes across top of each cookie with tip of utility knife.
Bake 15 to 20 minutes or until golden brown. Remove cookies with spatula to wire racks; cool completely.
Store tightly covered at room temperature. These cookies do not freeze well.
Makes about 4 dozen cookies.