Whatever Happened to ‘Policy Coordination’?

James Forder
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James Forder: Balliol College

Chapter 4 in Euroland and the World Economy, 2007, pp 75-90 from Palgrave Macmillan

Abstract: Abstract One often neglected aspect of the process leading to Economic and Monetary Union (EMU) in Europe is that when the European Monetary System (EMS) was created, the promotion of ‘policy coordination’ was seen as an important condition of its success. The issue of just what one means by ‘policy coordination’ might be debated, but I suggest that the relevant connotation of it at the time included demand-expanding policy and that lying in the background, were the theoretical arguments of Hamada (1974) and Hamada (1976) which formalized, amongst other things, the idea that there are circumstances where, if each country sets policy independently, deficient demand results. What distinguishes Hamada’s treatment from earlier consideration of similar issues is that his case for coordination arises from a positive sum game with a clear-cut free rider incentive — it is Hamada who gives these issues their properly ‘game theoretic’ aspect.

Keywords: Exchange Rate; Monetary Policy; Fiscal Policy; Euro Area; European Monetary Union (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37755-4_5

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DOI: 10.1057/9780230377554_5

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