Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies

Willem Buiter

No 1746, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper uses a small analytical two-region (the United States and the Rest of the Industrial World) model, to analyze three issues Concerning international economic interdependence and macroeconomic policy coordination that have been raised in connection with the September1985 World Economic Outlook published by the IMF.They are: (1) What should bethe monetary and/or fiscal response in the Rest of the Industrial World to a tightening of U.S. fiscal Policy and what should be the U.S. monetary response? (2) What Should be the monetary and/or fiscal response in the United States and in the Rest of the Industrial World to a"Collapse of the U.S. dollar?" The paper highlights the importance of determining the causes of such a "hard landing" for the U.S.dollar, as the appropriate policy responses are very sensitive to this; (3) What should be the macroeconomic policy response in the Industrial World to a disappointing real growth performance? Again the correct identification of the reason(s) for the disappointmentis shown to be crucial.The final Section discusses and qualifies the activist policy conclusions derived from the formal analysis.

Date: 1985-10
Note: ITI IFM
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Published as Buiter, Willem H. "Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies," International Monetary Fund Staff Papers, Volume 33, No. 3, September 1986.
Published as Buiter, Willem. "Macroeconomic Policy Design in an Interdependent World Economy" An Analysis of Three Contingencies," International Aspects of Fiscal Policies, ed. by J. Frenkel, Chicago: UCP, 1988.
Published as Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies , Willem H. Buiter. in International Aspects of Fiscal Policies , Frenkel. 1988

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Chapter: Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies (1988)
Working Paper: Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies (1986)
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