The Dog that Didn't Bark: The Strange Case of Domestic Policy Cooperation in the 'New Normal'

23 Pages Posted: 31 Aug 2015

See all articles by Tamim Bayoumi

Tamim Bayoumi

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

Date Written: July 2015

Abstract

This paper examines domestic policy cooperation, a curiously neglected issue. Both international and domestic cooperation were live issues in the 1970s when the IS/LM model predicted very different external outcomes from monetary and fiscal policies. Interest in domestic policy cooperation has since fallen on hard intellectual times — with knock-ons to international cooperation — as macroeconomic policy roles became highly compartmentalized. I first discuss the intellectual and policy making undercurrents behind this neglect, and explain why they are less relevant after the global crisis. This is followed by a discussion of: macroeconomic policy cooperation in a world of more fiscal activism; coordination across financial agencies and with macroeconomic policies; and how structural policies fit into this. The paper concludes with a proposal for a “grand bargain” across principle players to create a “new domestic cooperation.”

Keywords: Domestic Policy Cooperation, monetary policy, fiscal policy, central bank, international monetary fund, central banks, Structure and Scope of Government, General,

JEL Classification: H11, H12, C70

Suggested Citation

Bayoumi, Tamim, The Dog that Didn't Bark: The Strange Case of Domestic Policy Cooperation in the 'New Normal' (July 2015). IMF Working Paper No. 15/156. Available at SSRN: https://ssrn.com/abstract=2653609

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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