AN ECONOMIC APPROACH ON INTERNATIONAL POLICY COORDINATION ASPECTS

The analysis of international policy co-ordination has been a major growth area within macroeconomics for the past twenty years. It has, however, developed in a confused way, combining approaches from a number of areas of economic theory and being forced to confront the gap between that theory and international political economy. At the same time, basic approaches to the desirability of increased co-ordination often remain embedded in the original attitudes of participants towards domestic macroeconomic policy. This relates most obviously to issues such as the desirability of government management of the economy and the nature of the exchange rate system. The result has been that we now have an increasingly well-developed, highly technical body of literature which, with some interesting exceptions, supports the idea of increased international macroeconomic policy co-ordination, while remaining cautious about the size of the gains which will come from it. At the same time, uncertainty remains over the precise meaning of several of the terms used in the field and, more importantly, over the interpretation of the outcomes of international conferences and the actions of governments. This latter uncertainty relates not just to the likely consequences of policy actions but even to the motives for them. It is this contrast between the smooth surface of theory and the unevenness of historical events which we wish to capture here