Macroeconomic Coordination Research Articles

Préserver la zone CFA : la coordination macro-économique après la dévaluation

The recent 50 percent devaluation of the CFA Franc reinforces the importance of macro-economic coordination in the two monetary unions. The existing rule-based arrangements, such as the limit of a country's central-bank borowing being 20 percent of fiscal receipts, have not prevented some fiscal laxity, with the costs of one member's excesses potentially spilling over to the union as a whole. If the benefits of membership in the cfa zone (monetary discipline, low inflation) are to be preserved, the existing arrangements will need to be modified. The paper proposes that the 20 percent rule be strengthened to include a limit on each country's fiscal deficit and debt ; that sanctions on errant states be imposed through reduced access to borrowing ; and that the central banks finance quasi-fiscal deficits through the countries' budgets.

In-Depth Exploration of the Question of Regional Blockades

After a decade of reform, China has laid the initial foundations for a unified national market. With the tilting toward a dual-directional division (shuangxiang fenquan) of administrative power, however, the abnormal phenomena of increasingly strong local power, fragmented markets, and regional blockades have appeared. The primary market structures, distribution channels, and organization have all become more complicated and order has been disrupted. Since 1990, in particular, many regions, in an effort to invigorate their own markets, have used economic and administrative means to practice local protectionism, reinforce regional blockades and market divisions, and obstruct the lateral flow of production factors. As a result, interregional conflicts have escalated and trade barriers have risen throughout the nation. All this has seriously affected macroeconomic coordination and orderly development and has become a major impediment to improvement of the economic environment and straightening out of econo...

Private Behavior and Government Policy in Interdependent Economics.

This is a comprehensive survey of the macroeconomic co-ordination of international economies. Subjects covered include: monetary policies and exchange rates; abolishing exchange controls; policy co-ordination and the International Monetary System; assessing monetary shocks and exchange rate variability; EMS stability; economic interactions; and fiscal policies. The contributors are: Anthony S. Courakis, Ronald MacDonald, Mark P. Taylor, Peter N. Smith, Michael R. Wickens, Jeffrey A. Frankel, Kenneth A. Froot, Michael J. Artis, Giorgio Radaelli, Shaziye Gazioglu, Michael J. Moore, Neil Rankin, S. Mansoob Murshed, Somnath Sen, Paul R. Masson, Malcolm Knight, Patrick Minford, Emanuel Pikoulakis, David Currie, Ullrich Hoffmeyer , and Frederick van der Ploeg . This book is intended for international monetary economists and macroeconomists; graduate and third-year undergraduate students.

Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities

We study a rich class of noncooperative games that includes models of oligopoly competition, macroeconomic coordination failures, arms races, bank runs, technology adoption and diffusion, R&D competition, pretrial bargaining, coordination in teams, and many others. For all these games, the sets of pure strategy Nash equilibria, correlated equilibria, and rationalizable strategies have identical bounds. Also, for a class of models of dynamic adaptive choice behavior that encompasses both best-response dynamics and Bayesian learning, the players' choices lie eventually within the same bounds. These bounds are shown to vary monotonically with certain exogenous parameters. WE STUDY THE CLASS of (noncooperative) supermodular games introduced by Topkis (1979) and further analyzed by Vives (1985, 1989), who also pointed out the importance of these games in industrial economics. Supermodular games are games in which each player's strategy set is partially ordered, the marginal returns to increasing one's strategy rise with increases in the competitors' strategies (so that the game exhibits strategic complementarity2) and, if a player's strategies are multidimensional, marginal returns to any one com- ponent of the player's strategy rise with increases in the other components. This class turns out to encompass many of the most important economic applications of noncooperative game theory. In macroeconomics, Diamond's (1982) search model and Bryant's (1983, 1984) rational expectations models can be represented as supermodular games. In each of these models, more activity by some members of the economy raises the returns to increased levels of activity by others. In oligopoly theory, some models of Bertrand oligopoly with differentiated products qualify as supermodu- lar games. In these games, when a firm's competitors raise their prices, the marginal profitability of the firm's own price increase rises. A similar structure is present in games of new technology adoption such as those of Dybvig and Spatt (1983), Farrell and Saloner (1986), and Katz and Shapiro (1986). When more users hook into a communication system or more manufacturers adopt an interface standard, the marginal return to others of doing the same often rises. Similarly, in some specifications of the bank runs model introduced by Diamond and Dybvig (1983), when more depositors withdraw their funds from a bank, it is more worthwhile for other depositors to do the same. In the warrant exercise

On the Establishment of a Comprehensive Financial System of Macroeconomic Coordination and Balance

Since the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China, the central authorities have adopted a series of measures to effect a comprehensive readjustment of the national economy, carried out the economic structural reform step by step and in a planned way, and implemented the policy of invigorating domestic economy and opening to the outside world, thereby bringing about an excellent situation of sustained development of the national economy. The growth rate of industrial and agricultural production and that of the national income have gone up from year to year and the living standards of the people have improved steadily. Under this impetus, the financial situation has improved from year to year since 1982, and the proportional relationships between agriculture and industry and between heavy and light industries have gradually become better coordinated. Practice shows that our policies for economic readjustment and economic structural reform are correct and const...

Obstacles to macroeconomic coordination in Europe

Obstacles to macroeconomic coordination in Europe

Macroeconomic Co-ordination and the Summit

and the outlook over the next few years suggest a continuing need for the co-ordination of policies amongst the major industrialized countries in order to support the process of adjustment of international economic and financial imbalances which is underway. International policy co-ordination is needed to foster the adoption of national economic policies that are internationally consistent and sustainable over time. Its realization (under present international monetary arrangements) requires a framework for the multilateral discussion and surveillance of policies. An outline of the framework for policy co-ordination that the summit countries have been developing since the Tokyo Summit may serve to place the economic agenda for the Toronto Summit in perspective. The 1986 Tokyo Summit achieved two things in the area of policy co-ordination: 1/ it established the Group of Seven Finance Ministers as the new key forum for the development of the process of policy coordination; 2/ it delineated the procedure by which that process could be achieved. The new framework was an extension of the system of multilateral surveillance of national economic policies conducted by the G-5 in co-operation with the IMF since the 1982 Versailles Summit. With the procedures set out at Tokyo, governments undertook to review collectively their individual economic objectives and forecasts using a specific set of quantitative indicators. The review would check that the forecasts and objectives were mutually compatible. In the event of significant deviations from a desired course, the Finance Ministers and Central Bank Governors would attempt to agree on the adoption of 'remedial measures'. This policy co-ordination process was endorsed and strengthened at the 1987 Venice Summit. Although it 'provided no new advance in practice,' more attention was given 'to the need for governments to agree on policy objectives before they can appraise economic performance (Kenen, 1987). Also the declaration spoke of policy co-ordination (which, as Putnam and Bayne (1988) remark, had wholly dropped out of summit language in the early 1980s) as being essential to achieving stronger and more sustained global growth. Since effective international policy coordination requires implementation on a more regular basis than that which can be provided by annual summits, other fora play an important part in the discussion of policy interactions and surveillance. These include, as noted earlier, the regular process of consultation among finance ministers and central bank governors in the G-

Coordinating Coordination Failures in Keynesian Models

This paper focuses on the importance of strategic complementarities in agents’ payoff functions as a basis for macroeconomic coordination failures. Strategic complementarities arise when the optimal strategy of an agent depends positively upon the strategies of the other agents. We first analyze an abstract game and find that multiple equilibria and a multiplier process may arise when strategic complementarities are present. Often these equilibria can be Pareto ranked. We then place additional economic content on the analysis of this game by considering strategic complementarities arising from production functions, matching technologies, and commodity demand functions in a multisector, imperfectly competitive economy. C 1988 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. © 1988 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Coordination Styles and Economic Growth

Traditionally the problem of macroeconomic coordination has been discussed as being best done by either free-market competition or controlled planning. Such a formulation ignores several alternatives that societies can employ to encourage growth. Usually the argument for or against free-market competition has been fought on ideological grounds rather than by ascertaining whether it is most appropriate in some sectors of the economy rather than in others. To do this requires some way of conceptualizing economic sectors that breaks away from traditional thinking. This article suggests a four-sector model and then argues that there are four styles of coordination, each of which is most appropriate in a particular sector. It is argued that there is no single way to maximize growth in an economy and that different coordination mechanisms should be employed in different market contexts.

Workers' self-management and planning: The Yugoslav case

The new constitution that Yugoslavia adopted in 1974 provides an elaborate blueprint for a workers' self-managed economy. One feature of the constitutional changes is that, in addition to continuing to strengthen the role of workers in decision-making, they strengthen the ability for macroeconomic co-ordination and, specifically, the role of planning. To reconcile the seemingly conflicting objectives of decentralizing and co-ordinating decision-making, a novel form of participative planning was introduced. The new system of self-management planning, although having elements of central planning and indicative planning, is radically different from both. This paper, after briefly reviewing the evolution of planning in Yugoslavia, analyses the rules, procedures and theoretical premises of the new system of planning codified in 1976.