Obstacles to International Macroeconomic Policy Coordination
Coordination of macroeconomic policies among countries is not as straightforward in practice as it appears in theory. This paper discusses three obstacles to successful international coordination: (1) uncertainty as to the correct initial position of the economy, (2) uncertainty as to the correct objective, and (3) uncertainty as to the correct model linking policy actions to their effects in the economy. Previous results (NBER Working Paper No. 2059) showed that coordination under conditions of policy-maker disagreement about the correct model could very well reduce national welfare rather than raise it. This paper extends those results to allow for explicit policy-maker recognition of uncertainty regarding the correct model, as well as uncertainty regarding the model to which other policy-makers subscribe. It also shows that the potential gains from coordination, even when positive, are usually small relative to the gains from unilateral policy changes based on improved knowledge of the model.
|Date of creation:||Feb 1988|
|Date of revision:|
|Publication status:||published as From Princeton Studies in International Finance, No. 64, pp. 1-41,(December 1988). Journal of Public Policy, vol. 3, no. 3, 1989 (Condensed version).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zarnowitz, Victor, 1982. "On Functions, Quality, and Timeliness of Economic Information," The Journal of Business, University of Chicago Press, vol. 55(1), pages 87-119, January.
- Holtham, Gerald & Hughes Hallett, Andrew, 1987. "International Policy Cooperation and Model Uncertainty," CEPR Discussion Papers 190, C.E.P.R. Discussion Papers.
- 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.
- Warwick J. McKibbin & Jeffrey Sachs, 1986. "Coordination of Monetary and Fiscal Policies in the OECD," NBER Working Papers 1800, National Bureau of Economic Research, Inc.
- Canzoneri, Matthew B & Minford, Patrick, 1986. "When International Policy Coordination Matters: An Empirical Analysis," CEPR Discussion Papers 119, C.E.P.R. Discussion Papers.
- Zarnowitz, Victor & Moore, Geoffrey H, 1982. "Sequential Signals of Recession and Recovery," The Journal of Business, University of Chicago Press, vol. 55(1), pages 57-85, January.
- N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
- Hughes Hallett, Andrew, 1987. "Macroeconomic Policy Design with Incomplete Information: A New Argument for Coordinating Economic Policies," CEPR Discussion Papers 151, C.E.P.R. Discussion Papers.
- Melitz, Jacques, 1985. "The welfare case for the European Monetary System," Journal of International Money and Finance, Elsevier, vol. 4(4), pages 485-506, December.
- Gilles Oudiz & Jeffrey Sachs, 1984. "Macroeconomic Policy Coordination among the Industrial Economies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 1-76.
- Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
- Victor Zarnowitz, 1980. "On Functions, Quality, and Timeliness of Economic Information," NBER Working Papers 0608, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2505. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.