The Dog That Didn’t Bark

The Strange Case of Domestic Policy Cooperation in the “New Normal”

• Author(s): Mr.Tamim Bayoumi,
• Publisher: International Monetary Fund
• Pages: 22
• ISBN_10: 151358460X
  ISBN_13: 9781513584607
  
• Language: en
• Categories: Business & Economics / Economics / Macroeconomics , Business & Economics / Banks & Banking , Business & Economics / Public Finance ,

Description:... This paper examines domestic policy cooperation, a curiously neglected issue. Both international and domestic cooperation were live issues in the 1970s when the IS/LM model predicted very different external outcomes from monetary and fiscal policies. Interest in domestic policy cooperation has since fallen on hard intellectual times—with knock-ons to international cooperation—as macroeconomic policy roles became highly compartmentalized. I first discuss the intellectual and policy making undercurrents behind this neglect, and explain why they are less relevant after the global crisis. This is followed by a discussion of: macroeconomic policy cooperation in a world of more fiscal activism; coordination across financial agencies and with macroeconomic policies; and how structural policies fit into this. The paper concludes with a proposal for a “grand bargain” across principle players to create a “new domestic cooperation.”