The Dog that Didn't Bark: The Strange Case of Domestic Policy Cooperation in the 'New Normal'
23 Pages Posted: 31 Aug 2015
Date Written: July 2015
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: Suggested Citation