Global Macroeconomics: Policy Conflict and Coordination
Nation states are politically independent, but their economies have become progressively more interdependent. The policies of any government increasingly spill over into other countries, and foreign governments' policies increasingly affect the home economy. As a result, each government has only a limited ability to control its own national economy, and intergovernmental policy coordination is potentially of mutual benefit. Resolving policy conflicts and fostering cooperation on an international scale, however, is even more difficult than it is within nations.
International macroeconomics must therefore go beyond the analysis of individual open economies: a systemic, global perspective is needed. The essays in this path-breaking volume make important contributions to this rapidly developing field. The authors assess alternative methods for analysing the strategic interactions among governments; discuss the design of economic policies in an uncertain world; present estimates of the potential gains from macroeconomic policy coordination; evaluate the operation of the European Monetary System, a pioneering attempt at international coordination; and interpret recent developments in North-South macroeconomic interactions.