Triggs, Adam
Description
The G20 leaders’ forum was created at a time when the global
financial system was on a precipice. Credit markets were
freezing. Stock markets were collapsing. Rolling failures across
financial institutions were shattering economic confidence. In
their first communique, leaders concluded that a root cause of
the crisis was insufficient macroeconomic cooperation. It was
only through improved cooperation, they warned, that a global
depression could be averted.
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The thesis explores the impact of macroeconomic policy
cooperation within the G20 since 2008 and what it means for the
challenges facing the world today. It poses four central
questions. Does the G20 influence the domestic macroeconomic
policies of its members? What are the economic benefits of
macroeconomic cooperation and under what circumstances do they
arise? Does the G20 produce political benefits that encourage
cooperation? Has the G20 been successful in its attempts at
macroeconomic cooperation in the past?
The thesis attempts to answer these questions using data
analysis, a new G20-version of a general equilibrium model and
the results from in-depth interviews with 63 leaders, central
banks governors, finance ministers and officials from across all
G20 countries, including Kevin Rudd, Janet Yellen, Haruhiko
Kuroda, Ben Bernanke, Jack Lew, Mark Carney, Phil Lowe and 56
others.
The thesis looks at the six areas that make up the G20’s
history on macroeconomic cooperation since 2008 – a chronology
of the G20’s first 10 years as a forum for leaders -and their
relevance to the challenges facing the world in 2018: the
economic and political benefits of coordinating fiscal stimulus
(Chapter 3), fixing the inadequacies in the world’s
crisis-fighting mechanisms (Chapter 4), helping countries to
reduce debt and deficits (Chapter 5), strengthening monetary
policy cooperation (Chapter 6), reducing global current account
imbalances (Chapter 7) and promoting coordinated structural
reform (Chapter 8).
Chapter 9 summarises the findings of the thesis. Fundamentally,
the thesis demonstrates the benefits and influence of global
macroeconomic policy cooperation and the cost of abandoning it.
The thesis shows that the G20 does influence domestic
macroeconomic policies, that the benefits from cooperation can be
substantial, that the G20 can help politicians undertake
difficult reforms and that the G20 has a strong record of success
and remains a critical part of global economic governance.
Using the interview results, the thesis builds a new framework on
the influence of global forums on domestic policies. It explores
how this influence varies depending on the form of cooperation
(such as information sharing), the transmission mechanism of
influence (such as generating peer pressure) and the variables
that determine the strength of that influence (such as a
crisis).
Using the general equilibrium modelling results, it explores when
there is a case for cooperation and the benefits that can flow
from it. The gains to GDP, for example, can be 120 per cent
larger if fiscal stimulus is coordinated than if it is not. It
shows that coordination can help reduce global current account
imbalances, can help countries to reduce debt and deficits, can
help prevent currency wars and protectionism and, by coordinating
macroeconomic resources through international crisis-response
institutions, can prevent crises occurring and respond faster
when they do.
Finally, the thesis uses the results from each chapter to review
the overall success of the G20 on macroeconomic cooperation,
including where it has succeeded, where it has fallen short and
what factors influence its success. It shows that the G20 has had
a good track record in achieving its goals and that criticisms of
the G20 often overlook its shift from crisis response to focusing
on more difficult structural and institutional issues. The thesis
concludes by presenting a forward-looking agenda for the G20 to
improve macroeconomic cooperation in the future, particularly in
countering the current backlash against globalisation and
multilateral cooperation while addressing some of its root
causes.
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