International Policy Coordination in Historical Perspective
There have been several attempts at international monetary coordination in modern times, dating
back to at least the interwar conferences in Brussels in 1920, and in Genoa in 1922. Bretton
Woods sought to go beyond episodic cooperation by codifying certain “rules of the road” that
would limit the scope for beggar-thy-neighbor policies. During the stagflationary period that
followed the first oil price shock, the major industrialized countries tried to coordinate efforts to
jump start the world economy during the 1977/78 London and Bonn Summits. The 1985 Plaza
Agreement and 1987 Louvre Accord were focused on coordinated foreign exchange intervention.
The G-7 central banks coordinated interest rate cuts and liquidity provision after the stock market
crash in October 1987 (and the G-20 coordinated fiscal expansion in the aftermath of the global
financial crisis).
Two recent episodes illustrate the difficulties of successful international policy coordination.
The first is the multilateral consultation on global imbalances, which was established in the mid-
2000s as a tool of multilateral surveillance to address the issue of resolving global imbalances
while maintaining robust global growth. The aim of the multilateral consultation as to facilitate
action-oriented debate and, ultimately, policy actions by participants that would make a
contribution to reducing imbalances. While the consultations did identify policy packages to be
adopted by each participant, it is fair to say that implementation of the packages fell short of the
intentions. One reason may have been that the process, which did not come from the participants
themselves, lacked ownership. Rather than being perceived as an opportunity for joint action to
result in better outcomes for all, the exercise became more a “blame game” in which each
participant preferred to blame others as responsible for global imbalances. Moreover, even though
participants recognized the potential risks from ever-growing imbalances in the abstract, they were
not seized by the urgency for action. As a result, policies were not materially altered and, in the
event, the Great Recession that followed the multilateral consultation reduced the urgency of
dealing with global imbalances.
International Policy Coordination in Historical Perspective
There have been several attempts at international monetary coordination in modern times, dating
back to at least the interwar conferences in Brussels in 1920, and in Genoa in 1922. Bretton
Woods sought to go beyond episodic cooperation by codifying certain “rules of the road” that
would limit the scope for beggar-thy-neighbor policies. During the stagflationary period that
followed the first oil price shock, the major industrialized countries tried to coordinate efforts to
jump start the world economy during the 1977/78 London and Bonn Summits. The 1985 Plaza
Agreement and 1987 Louvre Accord were focused on coordinated foreign exchange intervention.
The G-7 central banks coordinated interest rate cuts and liquidity provision after the stock market
crash in October 1987 (and the G-20 coordinated fiscal expansion in the aftermath of the global
financial crisis).
Two recent episodes illustrate the difficulties of successful international policy coordination.
The first is the multilateral consultation on global imbalances, which was established in the mid-
2000s as a tool of multilateral surveillance to address the issue of resolving global imbalances
while maintaining robust global growth. The aim of the multilateral consultation as to facilitate
action-oriented debate and, ultimately, policy actions by participants that would make a
contribution to reducing imbalances. While the consultations did identify policy packages to be
adopted by each participant, it is fair to say that implementation of the packages fell short of the
intentions. One reason may have been that the process, which did not come from the participants
themselves, lacked ownership. Rather than being perceived as an opportunity for joint action to
result in better outcomes for all, the exercise became more a “blame game” in which each
participant preferred to blame others as responsible for global imbalances. Moreover, even though
participants recognized the potential risks from ever-growing imbalances in the abstract, they were
not seized by the urgency for action. As a result, policies were not materially altered and, in the
event, the Great Recession that followed the multilateral consultation reduced the urgency of
dealing with global imbalances.
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