ABSTRACT
In his paper, Gilles Oudiz presents a clear analysis of the theoretical underpinnings and of some economic implications of international policy coordination. Oudiz builds his case in favour of policy coordination within a frame work of a simple two-country model. The argument is based on the assumption that a change in the monetary and fiscal policies of the foreign country can increase welfare in the home country while not affecting foreign welfare. The foreign country has an incentive to carry out such policies only under a regime of coordination because it would benefit from respective measures of the home country. Thus, coordination leads to an increase in world welfare.
