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Obstacles to International Macroeconomic Policy Coordination*

Published online by Cambridge University Press:  07 April 2017

Jeffrey A. Frankel
Jeffrey A. Frankel
Affiliation:
Economics, University of California Berdeley
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Abstract

This paper considers the effects of uncertainty on the magnitude of prospective welfare gains from international macroeconomic policy coordination. Three different sources of uncertainty are studied: the initial state of the economy; the correct welfare weights to be assigned to policy targets; and the impact on the economy that economic models attribute to policy changes. Simulation results show that uncertainty about any of the three reduces the likely gains from coordination and creates the possibility of negative effects. The gains from improved economic knowledge can be quite substantial in relation to the gains from coordination. This suggests that the development and exchange of economic information can be an important function of international cooperation.

Type
Articles
Information
Journal of Public Policy , Volume 8 , Issue 3-4 , July 1988 , pp. 353 - 374
Copyright
Copyright © Cambridge University Press 1988

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