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Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies

  • Buiter, Willem H.

The paper uses a small analytical model of two regions, the United States and the Rest of the Industrial World, to analyze three topical issues concerning international economic interdependence and macroeconomic policy coordination. They are: (1) What should be the monetary and/or fiscal response in the Rest of the Industrial World to a tightening of United States fiscal policy and what should be the United States monetary response? (2) What should be the monetary and/or fiscal response in the United States and in the Rest of the Industrial World to a 'collapse of the United States dollar?' The paper highlights the importance of determining the causes of such a 'hard landing' for the United States dollar, as the appropriate policy responses are very sensitive to this; (3) What should be the macroeconomic policy response in the Industrial World to a disappointing real growth performance? Again the correct identification of the reason(s) for the disappointment is shown to be crucial. The final section discusses and qualifies the activist policy conclusions derived from the formal analysis.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 92.

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Date of creation: Jan 1986
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Handle: RePEc:cpr:ceprdp:92
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  1. Willem H. Buiter & Marcus H. Miller, 1983. "Costs and Benefits of an Anti-Inflationary Policy: Questions and Issues," NBER Working Papers 1252, National Bureau of Economic Research, Inc.
  2. Obstfeld, Maurice & Rogoff, Kenneth S., 1983. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," Scholarly Articles 12491027, Harvard University Department of Economics.
  3. Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-80, May.
  4. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  5. Jeffrey Sachs, 1985. "The Dollar and the Policy Mix: 1985," NBER Working Papers 1636, National Bureau of Economic Research, Inc.
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