Suchergebnisse

This paper argues that while sources of potential discipline over domestic macro economic policies such as pegged exchange rates, high capital mobility, and IMF policy conditionality are commonly viewed as constraints, it is usually more productive to view them as influencing incentive structures in a world of multiple relevant actors. From this perspective, pegged, as opposed to genuinely fixed exchange rates, are typically not an adequate substitute for domestic discipline enhancing measures. The micro level political economy analysis presented suggests serious limits to the effectiveness of external strategies as sources of discipline. Indeed, their effects can sometimes be perverse. For example, high capital mobility under fixed exchange rates can reduce short run discipline over fiscal policy and impede the ability of an independent central bank to counteract political business cycles in fiscal policy. The analysis highlights the problems of attempting to use commitment devices with asymmetric time profiles to overcome problems generated by the asymmetric short run effects of discretionary monetary and fiscal policies. In particular exchange rate pegging gives front loaded benefits and delayed costs. This makes for a particularly inefficient strategy for trying to avoid domestic macro economic time inconsistency problems. Where short time horizons greatly discount the prospective future costs of a currency crisis, the political incentives generated by pegged rates often fail to provide sufficient monetary and fiscal restraint to avoid such crises. They also tend to discourage the prompt adjustment of disequilibrium exchange rates. As a consequence, exit from a pegged regime is often delayed too long and currency crises result. Thus the political incentive structures generated by exchange rate pegging can be as great a source of difficulty for the smooth operation of intermediate exchange rate regimes as are the economic forces of high capital mobility stressed by many economists. The overall thrust of this paper is to suggest that external sources of discipline over macroeconomic policies are often weak and sometimes perverse. For many, and perhaps most countries, the primary focus for discipline should be internal.

ABSTRACTThis paper stresses the importance of taking domestic economic structures and political pressures into account when considering issues of international macroeconomic policy coordination. The existence of domestic biases can cause policy coordination to increase rather than reduce macroeconomic instability. The paper offers a survey of the literature on national macroeconomic policy preferences and inflation unemployment tradeoffs. While this research is still in its infancy, it is clear that there are important differences across countries which must be taken into account in designing coordination strategies.

The accelerating United States trade deficit has again focused widespread political attention on industrial policy issues. However, given the breadth and complexity of the industrial policy issues, we can be confident that strengthening the U.S. international trade position will not be sufficient to quell concern over this area of economic policy.

This article argues that while macroeconomic and monetary interdependence is certainly important, the previous tendency to overlook the significance of such factors for the U.S. economy has given way to frequent tendencies to exaggerate greatly their quantitative importance. The available systematic empirical studies suggest that the United States has neither exported as much inflation and unemployment to other countries as is frequently alleged in popular discussions, nor imported as much inflation and unemployment from abroad. While effects of such international factors as oil price and exchange-rate changes are far from trivial our inflation has been primarily homegrown and we cannot take fluctuations in the dollar as a clear indicator for the course of domestic policies.