Abstract

Transmission and Coordination of National Economic Policies in the Face of Global Economic Integration

At present, great hopes are being placed in improved international coordination of economic policies, which is understood to mean a case-by-case coordination of national policies through international negotiation. The expected result is a gain in prosperity by participating countries. How well-founded such expectations are has been analyzed in a critical appraisal of important recent studies on this complex of problems reflecting the state of the art. The appraisal initially discusses certain results of theoretical and empirical analyses of the direction and dimension of spillovers of national economic policies into foreign government’s target variables. Subsequently, theoretical and empirical results of game-theory approaches to prosperity gains from international policy coordination are presented and subjected to a critical evaluation. On balance, the author reaches a rather sceptical conclusion. So far, just small prosperity gains, if any, have been proved to result from international policy coordination; such gains must, moreover, be referred to as strongly risk-prone. Under certain circumstances, they may even turn into losses.