Introduction

International economic policy coordination is the process whereby ‘countries modify their economic policies in what is intended to be a mutually beneficial manner, taking account of international economic linkages’ (Group of Thirty, 1988). This is a broad definition, encompassing a spectrum of forms of coordination ranging from the rather limited to the ambitious. At the ambitious end is the Bonn economic summit of 1978, where the Group of Seven (G7) countries agreed to a full-blown package deal on macroeconomic and trade policies (see Putnam and Bayne, 1987). At the more limited end is the multilateral surveillance process carried out by the International Monetary Fund under the Bretton Woods fixed exchange-rate system.

Recent years have seen a resurgence of interest in international policy coordination, particularly in the monetary sphere which is the concern of this survey.

The first half of the 1980s saw a period when governments were primarily concerned to ‘put their own house in order’, combating inflation by means of tight monetary policy. In this period, which saw a large and sustained appreciation of the dollar, international policy coordination was out of favour. But, by 1985, concern over the substantial misalignment of the dollar led to renewed interest in monetary coordination, particularly on the part of the USA. The Plaza Agreement of September 1985 was to coordinate monetary policy actions to manage the steady decline of the dollar from its February 1988 peak. A series of G7 summits since then have reaffirmed cooperation over monetary policy.