International macroeconomic policy coordination: an overview

Abstract

This article, which serves as an introduction to the Oxford Review of Economic Policy's issue on 'Macroeconomic Policy Coordination: Global Imbalances and Global Growth', charts the evolution of international macroeconomic policy coordination from the end of the Second World War until the present day. The arrangements laid out at the Bretton Woods Conference in 1944 provide an intellectual framework with which to assess the evolving need for and feasibility of international coordination across three historical periods: the 'fixed-but-adjustable' exchange-rate arrangements of the Bretton Woods system; the subsequent flexible exchanges period of the 'non-system' which led into the Great Moderation; and finally the period since the global financial crisis of 2008. Increased economic integration, particularly through the capital account, combined with asymmetries in exchange-rate regimes between China and the US, have shown that reliance on the automatic adjustment mechanisms of the non-system are no longer feasible, so that a return to policy cooperation is necessary in order to rebalance the world economy and reduce the adverse spill-over impacts that uncoordinated rebalancing would entail. The article explores the nature of this coordination and provides a context for other contributions to the issue, analysing positive and normative aspects of macroeconomic policy coordination from a global perspective and from the prospective of key global players including China and the European Union.