After the Fall: Lessons for Policy Cooperation from the Global Crisis

26 Pages Posted: 18 Jul 2014

See all articles by Tamim Bayoumi

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Date Written: June 2014


A crisis is a terrible thing to waste, and nowhere is this truer than in the arena of international economic policy cooperation. With the world facing the largest and most synchronized plunge in output of the postwar era, policy makers banded together to find solutions. This paper looks at the lessons from what did — and did not — occur in the area of policy cooperation since the crisis. Outcomes seem to be weaker over time in areas such as macroeconomic policies, where institutional procedures were less well defined and there were disagreements over spillovers. By contrast, cooperation seems to have been most effective where there was a consensus that such policies could avoid the risk of highly detrimental outcomes and institutional arrangements were more concrete. Principle amongst these was trade, but bank capital buffers, IMF resources, and derivatives exchanges also fall into this category. Lessons for those interested in promoting cooperation seems to be: it may be more fruitful to: focus on the potential for major costs from a lack of cooperation, rather than the minor gains from fuller coordination; strive for more consensus estimated spillovers; convince policy-makers costs of loss of cooperation are large; and focus on building better and more enduring institutional arrangements.

Keywords: Fiscal policy, Monetary policy, Developed countries, Emerging markets, Group of Twenty, International cooperation, Policy cooperation, institutional coarrangements, policy spillovers, central bank, monetary fund, financial stability, monetary policies, financial institutions, financial sector, liquidity support, financial markets, financial market, financial regulation, inflation, hedge, reserve requirements, derivatives trading, financial system, moral hazard, national bank, international capital, hedge funds, monetary transmission, treasury bonds, liquidity ratio, monetary expansions, international monetary arrangements, international banks, liquidity management, international standards, m

JEL Classification: F33, F35, F41, F13, E61

Suggested Citation

Bayoumi, Tamim, After the Fall: Lessons for Policy Cooperation from the Global Crisis (June 2014). IMF Working Paper No. 14/97. Available at SSRN:

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

United Kingdom

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