International Coordination of Economic Policies: Scope, Methods, and Effects

72 Pages Posted: 1 Jun 2004 Last revised: 20 Oct 2021

See all articles by Jacob A. Frenkel

Jacob A. Frenkel

Merrill Lynch & Co. - Sovereign Advisory Group and Global Financial Institutions Group; National Bureau of Economic Research (NBER)

Morris Goldstein

Peter G. Peterson Institute for International Economics

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Multiple version iconThere are 2 versions of this paper

Date Written: July 1988

Abstract

This paper discusses the scope, methods, the effects of international coordination of economic policies. In addressing the scope for and of coordination, the analysis covers the rationale for coordination, barriers to coordination, the range and specificity of policies to be coordinated, the frequency of coordination, and the size of the coordinating group. Turning to the methods of coordination, the emphasis is on the broad issues of rules versus discretion, single-indicator versus multi-indicator approaches, and hegemonic versus more symmetric systems. In an attempt to shed some light on the effects of alternative rule- based proposals for coordination, we present some simulations of a global macroeconomic model (MULTIMQD) developed in the International Monetary Fund. The simulations considered range from 'smoothing rules for monetary and fiscal policy that imply only minimal international coordination, to more activist "target-zone" proposals that place greater restrictions on national authorities in the conduct of monetary and/or fiscal policies. The simulation results are compared to the actual evolution of the world economy over the 1974-87 period. Our findings suggest that simple mechanistic rule-based proposals are unlikely to lead to improved performance.

Suggested Citation

Frenkel, Jacob A. and Goldstein, Morris and Masson, Paul R., International Coordination of Economic Policies: Scope, Methods, and Effects (July 1988). Available at SSRN: https://ssrn.com/abstract=439591

Jacob A. Frenkel (Contact Author)

Merrill Lynch & Co. - Sovereign Advisory Group and Global Financial Institutions Group

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United States

National Bureau of Economic Research (NBER)

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Morris Goldstein

Peter G. Peterson Institute for International Economics ( email )

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Paul R. Masson

International Monetary Fund (IMF) - Research Department ( email )

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The Brookings Institution ( email )

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