The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper examines domestic policy cooperation, a curiously neglected issue. Both
international and domestic cooperation were live issues in the 1970s when the IS/LM
model predicted very different external outcomes from monetary and fiscal policies.
Interest in domestic policy cooperation has since fallen on hard intellectual times-with
knock-ons to international cooperation-as macroeconomic policy roles became highly
compartmentalized. I first discuss the intellectual and policy making undercurrents behind
this neglect, and explain why they are less relevant after the global crisis. This is followed
by a discussion of: macroeconomic policy cooperation in a world of more fiscal activism;
coordination across financial agencies and with macroeconomic policies; and how
structural policies fit into this. The paper concludes with a proposal for a 'grand bargain'
across principle players to create a 'new domestic cooperation.'