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Obstacles to International Policy Coordination, and How to Overcome Them

Author

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  • Jonathan David Ostry
  • Atish R. Ghosh

Abstract

In bilateral and multilateral surveillance, countries are often urged to consider alternative policies that would result in superior outcomes for the country itself and, perhaps serendipitously, for the world economy. While it is possible that policy makers in the country do not fully recognize the benefits of proposed alternative policies, it is also possible that the existing policies are the best that they can deliver, given their various constraints, including political. In order for the policy makers to be able and willing to implement the better policies some quid pro quo may be required—such as a favorable policy adjustment in the recipients of the spillovers; identifying such mutually beneficial trades is the essence of international policy coordination. We see four general guideposts in terms of the search for globally desirable solutions. First, all parties need to identify the nature of spillovers from their policies and be open to making adjustments to enhance net positive spillovers in exchange for commensurate benefits from others; but second, with countries transparent about the spillovers as they see them, an honest broker is likely to be needed to scrutinize the different positions, given the inherent biases at the country level. Third, given the need for policy agendas to be multilaterally consistent, special scrutiny is needed when policies exacerbate global imbalances and currency misalignments; and fourth, by the same token, special scrutiny is also needed when one country’s policies has a perceptible adverse impact on financial-stability risks elsewhere.

Suggested Citation

  • Jonathan David Ostry & Atish R. Ghosh, 2013. "Obstacles to International Policy Coordination, and How to Overcome Them," IMF Staff Discussion Notes 13/11, International Monetary Fund.
  • Handle: RePEc:imf:imfsdn:13/11
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    Cited by:

    1. Georgiadis, Georgios, 2016. "Determinants of global spillovers from US monetary policy," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 41-61.
    2. Ostry, Jonathan D. & Ghosh, Atish R., 2016. "On the obstacles to international policy coordination," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 25-40.
    3. repec:wsi:jicepx:v:08:y:2017:i:03:n:s179399331750017x is not listed on IDEAS
    4. Engel, Charles, 2016. "International coordination of central bank policy," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 13-24.
    5. Stijn Claessens, 2015. "An Overview of Macroprudential Policy Tools," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 397-422, December.
    6. Aida Caldera Sánchez & Morten Rasmussen & Oliver Röhn, 2016. "Economic Resilience: What Role for Policies?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-44, June.
    7. Chen, Qianying & Filardo, Andrew & He, Dong & Zhu, Feng, 2016. "Financial crisis, US unconventional monetary policy and international spillovers," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 62-81.
    8. Tamim Bayoumi & Giovanni Dell'Ariccia & Karl F Habermeier & Tommaso Mancini Griffoli & Fabian Valencia, 2014. "Monetary Policy in the New Normal," IMF Staff Discussion Notes 14/3, International Monetary Fund.
    9. Stracca, Livio & Lo Duca, Marco, 2014. "The effect of G20 summits on global financial markets," Working Paper Series 1668, European Central Bank.
    10. Bastianin, Andrea & Conti, Francesca & Manera, Matteo, 2016. "The impacts of oil price shocks on stock market volatility: Evidence from the G7 countries," Energy Policy, Elsevier, vol. 98(C), pages 160-169.
    11. Jeffrey A. Frankel, 2016. "International Coordination," NBER Working Papers 21878, National Bureau of Economic Research, Inc.
    12. Prachi Mishra & Raghuram G. Rajan, 2016. "Rules of the Monetary Game," Working Papers id:10533, eSocialSciences.
    13. Lo Duca, Marco & Stracca, Livio, 2015. "Worth the hype? The effect of G20 summits on global financial markets," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 192-217.

    More about this item

    Keywords

    Welfare; International cooperation; Economic policy; Policy Coordination; Uncertainty; Guideposts;

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