THE INTERNATIONAL CO-ORDINATION OF MACROECONOMIC POLICY
This research was carried out under Economic and Social Research Council grant WB01250034.
15.1 WHAT IS INTERNATIONAL POLICY CO-ORDINATION?
The aim of this chapter is to survey the state of knowledge on the question of international macroeconomic policy co-ordination, and to consider the direction in which current arrangements for such co-ordination are likely to develop. Academic interest in this area has grown dramatically over the past ten to fifteen years for a number of reasons. First and foremost, there is the recognition of the growing interdependence between the economies of nations arising from increased flows of trade, the internationalization of the financial sector and the growth of transnational production. Second, macroeconomists have developed a keener interest in a more systematic approach to policy issues per se. Finally, the introduction of game-theroretical concepts into open-economy macroeconomics has provided the profession with the necessary tools to pursue issues to do with international policy co-ordination. In this chapter we are concerned with the extensive and rapidly growing research literature on this subject, and also with questions of policy co-ordination in practice.