INTERNATIONAL ADJUSTMENTS THROUGH MICRO AND MACROECONOMIC COORDINATION: THE EXAMPLE OF EUROPEAN UNION

Abstract

The process of ‘globalisation’ now a days leading to a greater interdependence among nations than ever before. And thus greater cross-border spillovers imply an increased need for international policy coordination. The internationalisation of assets and goods market together with the advances in transportation and information technologies, has guaranteed that what happens in one country, especially in a large country, will be felt by other countries. The upsurge in economic integration, in recent times, in the shape of free trade areas, customs union, common markets and various types of preferential association have clearly showed the widespread belief on the value of economic integration. Those interactions are chosen as a way of economic growth, export-led for example, even though they might have some conflicting features. The integration of not less than twelve currencies into a single one in Europe is one of the most amazing facts in the history of modem economics. This paper is primarily based on secondary sources. Extensive literature review has been conducted to frame the concept and issues. Despite the consensus on the benefits of micro and macroeconomic policy coordination, economic blocs still face many difficulties in doing it. Those difficulties arise from countries' varied and usually opposing views and principles about micro and macroeconomic policy. It is undoubtedly difficult to ensure the benefits for all the stakeholders while going for economic growth through opening the economy with all sides. The need for macroeconomic policy co-ordination is obviously a must in an integrated area to realize the full benefits of integration. It must be admitted however, that coordination is a difficult task for countries to do, considering their immense differences. With the increasing number of them forming regional arrangements, one cannot help asking of what path would this cooperation be heading towards-basically a question of success or failure.