International Policy Coordination: Experience and prospects

International policy coordination in terms of fiscal, monetary, commercial, and industrial policies are considered in this paper. Coordination does not mean that policies are to be the same in various countries, but that they should fit together in a balanced way to promote economic growth and stabilization. The different policy concepts are explained, and reasons are given for desiring international coordination. A primary concern is the effects of these policies on exchange rate stability. It is not surprising that the members of the EU, in preparing for the initiation of the European Monetary System are using coordinated policies to achieve convergence, as a prerequisite for membership. The policies of fiscal consolidation in Europe are not necessarily unique or optimal for achieving the stated goals. Other patterns of coordination that might have worked better for the European countries are considered. Policy coordination to deal with the Asian financial crises of 1997 are also discussed. A case is made in general terms, not associated with any particular economic events, for coordination among countries by means of counter cyclical policy intervention.