Abstract
The central theorem about the economic gains from international policy coordination which has very strong implications for the design of the international monetary system is that if countries in general set their policies jointly they will be better able to attain their economic objectives than if they set them independently. (The alternative non-cooperative equilibrium, in which each country independently sets own policies, taking the politicies of the others as given, is its termed the Nash equilibrium). The coordination theorem appears to be a strong argument for policy makers to set up the machinery for regular meetings and cooperative setting of macroeconomic policies, and the entire issue has been a popular research topic in the academic community since at least the early 1960s.
I thank Julia Lowell for highly efficient research assistance and Ralph Bryant, Doug Purvis, and John Williamson for comments and suggestions. Summary versions of the paper are available as Frankel [15] and [17].
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Frankel, J.A. (1992). International Nominal Targeting (INT): A Proposal for Overcoming Obstacles to Policy Coordination. In: Baldassarri, M., McCallum, J., Mundell, R. (eds) Global Disequilibrium in the World Economy. Central Issues in Contemporary Economic Theory and Policy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-22269-8_15
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