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Obstacles to International Macroeconomic Policy Coordination

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  • Frankel, Jeffrey

Abstract

This paper considers the effects of uncertainty on the magnitude of prospective welfare gains from international macroeconomic policy coordination. Three different sources of uncertainty are studied: the initial state of the economy; the correct welfare weights to be assigned to policy targets; and the impact on the economy that economic models attribute to policy changes. Simulation results show that uncertainty about any of the three reduces the likely gains from coordination and creates the possibility of negative effects. The gains from improved economic knowledge can be quite substantial in relation to the gains from coordination. This suggests that the development and exchange of economic information can be an important function of international cooperation.
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Suggested Citation

  • Frankel, Jeffrey, 1987. "Obstacles to International Macroeconomic Policy Coordination," Department of Economics, Working Paper Series qt2vv7z9cr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt2vv7z9cr
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    References listed on IDEAS

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    1. Cooper, Richard N., 1985. "Economic interdependence and coordination of economic policies," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 23, pages 1195-1234, Elsevier.
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