Front Matter

Front Matter

Author(s):
Wilfried Guth
Published Date:
December 1988
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    Economic Policy Coordination

    Moderator

    Wilfried Guth

    Proceedings of an international seminar held in Hamburg

    International Monetary Fund

    HWWA-Institut für Wirtschaftsforschung-Hamburg

    Library of Congress Cataloging-in-Publication Data

    Economic policy coordination : conference organized by the International Monetary Fund in co-sponsorship with the HWWA–Institut für Wirtschaftsforschung-Hamburg in memory of Armin Gutowski / moderator, Wilfried Guth.

    p. cm.

    ISBN 1-557-75025-4

    1. Economic policy—Congresses. 2. International finance—Congresses. I. Guth, Wilfried, 1919- . II. Gutowski, Armin. III. International Monetary Fund. IV. HWWA-Institut für Wirtschaftsforschung-Hamburg.

    HD73.E255 1988

    332’.042—dc19 88-23010

    CIP

    Price: U.S.$15.00

    © 1988 International Monetary Fund

    Reprinted March 1990

    INTERNATIONAL MONETARY FUND

    Washington, D.C. 20431

    Contents

    1 Economic Policy Objectives and Policymaking in the Major industrial Countries

    2 International Adjustment and the Dollar: Policy Illusions and Economic Constraints

    3 Empirical Evidence of Effects of Policy Coordination Among Major Industrial Countries Since Rambouillet Summit of 1975

    4 International Coordination of Economic Policies: Scope, Methods, and Effects

    5 Summary and Conclusions

    The following symbols have been used throughout this paper:

    … to indicate that data are not available;

    — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

    – between years or months (e.g., 1984–85 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

    / between years (e.g., 1985/86) to indicate a crop or fiscal (financial) year.

    “Billion” means a thousand million.

    Minor discrepancies between constituent figures and totals are due to rounding.

    Foreword

    The recognition that international policy coordination is crucial for globally balanced economic growth has always been fundamental for the Fund’s work. The need for such coordination has assumed new prominence since the major industrial countries met in Paris in February 1987, and, in the Louvre Accord, agreed to intensify coordination to promote more balanced economic growth and to reduce existing imbalances. Since then, the heads of state or government of the major countries have agreed, in the Venice Economic Declaration in June 1987, to strengthen existing arrangements for multilateral surveillance and economic cooperation, and the need for these stronger arrangements has been confirmed by a number of subsequent statements by the ministers and central bank governors of the Group of Seven industrial countries.

    With a little over a year’s experience with such intensified coordination among the major countries, and against the background of the Fund’s continuing involvement in this area, we thought it appropriate to step back and invite a number of practitioners and experts to give their views. The result was a seminar organized by the Fund and cosponsored by the HWWA-Institute in Hamburg in commemoration of the distinguished economist, Armin Gutowski, who was the President of the HWWA-Institute and Professor of Economics at the University of Hamburg until his death in 1988. The papers and comments that are brought together in this volume represent the current thinking of those who have been intimately involved in how coordination has worked, and in how it can be expected to work in the future. Although these views are personal, they are expert, and represent a substantial practical and theoretical contribution to an important debate. My thanks go to all who have contributed to this conference, in particular to my friend Wilfried Guth who has conducted the proceedings of the seminar in an admirable and most productive manner.

    Michel Camdessus

    Managing Director

    International Monetary Fund

    Introductory Remarks

    Wilfried Guth

    Ladies and gentlemen:

    It is a privilege and a pleasure for me to serve as moderator of this conference with its distinguished authors, panelists, and participants. My pleasure was even greater when I saw the high quality of the prepared papers.

    I gladly accepted the invitation to act as moderator because it was our dear and sadly missed friend Armin Gutowski who, together with the International Monetary Fund, initiated the concept for this conference and asked me to take on this task. In addition, I have had close ties with the Fund, where I served as Executive Director from 1959 to 1961 under the inspiring leadership of Per Jacobsson.

    I think it is fitting for me to thank the Fund and the HWWA-Institut für Wirtschaftsforschung on behalf of the participants for arranging this high-level seminar in advance of the Annual Meetings of the Fund and the World Bank, which are to take place for the first time in Germany, in Berlin, in September.

    The subject of our conference is very topical indeed. Even though the chosen title is more narrowly defined, the central issue of our deliberations is, to my mind economic policy coordination, its virtues, possible pitfalls, and limitations. It is clearly a question of political economy and, as the prepared papers show, an extremely complex one in its factual and methodological aspects. Not surprisingly, therefore, the attitudes toward coordination as well as the prescriptions for actual policy issues are highly controversial—although, it seems to me, more so among academics than politicians. Among the latter, the need for international policy coordination or cooperation is today largely uncontested, at least in words if not sufficiently in deeds. The academic controversies are highly valuable for our discussion, as they help to bring the real problems into much sharper focus than polished summit statements or Louvre Accords.

    Needless to say, international policy coordination is not an entirely new concern. In the past decades we always had a degree of such cooperation, although concerted action was more or less limited to relatively short periods of crisis management rather than crisis prevention. However, in the 1980s the issue of ongoing policy coordination has attracted increasing attention and assumed new dimensions owing to structural changes and some deeply rooted problems in our global environment:

    • The interdependence of national economies and policies has greatly increased (a fact that is implied in the title of our conference);

    • the former hegemonic role of the U.S. economy (l’économie dominante?) has to a great extent vanished, although it has retained a special position in important respects;

    • in the process of financial deregulation and liberalization, international capital flows have gained overwhelming importance;

    • there have been large exchange rate fluctuations and misalignments, especially of the dollar, accompanied by greatly disturbing balance of payments disequilibria and protectionist tendencies; and

    • the business and banking communities have responded to these far-reaching changes by developing global or multinational corporate strategies, for example, by replacing trade with international production.

    All this implies new challenges to the major trading nations’ governments and central banks. And although they have fully recognized that they cannot adequately cope with these challenges individually, their collective effort still leaves much to be desired. As I see it, the basic tasks and questions before them are threefold:

    • how to achieve a more satisfactory rate of world economic growth without renewed inflation;

    • how to arrive at more stable exchange rates and sustainable external payments balances of the main industrial countries without recourse to protectionism; and

    • how to ease the debt problem of the Third World.

    I am sure the first two issues will be at the center of our discussions and we should never lose sight of the third one as it is closely interrelated with the others.

    I stress these actual world economic problems as we should, in my opinion, always be aware that international cooperation is not an end in itself. The question which must occupy our minds is mainly whether it can help to solve these basic problems. Or, to put the same question differently: why is it that in spite of good intentions on the part of all partners, international cooperation has not produced better results thus far, and how could it be improved? Or, to bring in a more sceptical note which is reflected in a number of the papers presented here: does it make sense to talk about, conceive models for, and try to enact international cooperation as long as the principal partners agree neither on priorities of economic policy objectives nor on the underlying theoretical models or philosophies? Could one not merely rely on the assumption that every country is well aware of its “enlightened self interest” which must take into account the repercussions of its policy actions on its partner countries and their likely reactions?

    These might be questions which will arise in the course of our debates and I am sure there will be many others. I am confident that we will all greatly benefit from an exchange of views on these pressing issues among the eminent academics and practitioners who are gathered around this table.

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