DP1141 Double-Edged Incentives: Institutions and Policy Coordination

Author(s): Torsten Persson, Guido Tabellini
Publication Date: February 1995
Keyword(s): Fiscal Policy, Incentives, Monetary Policy, Policy Coordination
JEL(s): E5, E61, E62, F00
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1141

This paper illustrates some of the most important insights of the literature on international fiscal and monetary policy coordination. It notes that the analysis of international policy interactions is enriched by taking the incentives in the domestic policy process into account. These incentives can either be tied to credibility issues or to political institutions. The paper also focuses on the role of institutions that can enforce and support international cooperation. We discuss alternative task assignments between member countries and the central policy-making level, and alternative processes for collective decision making.