Staff Discussion Notes Volume 2016 Issue 009: Macroeconomic Management When Policy Space is Constrained: A Comprehensive, Consistent and Coordinated Approach to Economic Policy (2016)

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Macroeconomic Management When Policy Space is Constrained: A Comprehensive, Consistent and Coordinated Approach to Economic Policy

Author:

Vitor Gaspar

Vitor Gaspar
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Mr. Maurice Obstfeld

Mr. Maurice Obstfeld
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Ms. Ratna Sahay

Ms. Ratna Sahay
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Mr. Douglas Laxton

Mr. Douglas Laxton
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Mr. Dennis P Botman

Mr. Dennis P Botman
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Kevin Clinton

Kevin Clinton null

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Mr. Romain A Duval

Mr. Romain A Duval
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https://orcid.org/0000-0002-2775-7172

Kotaro Ishi

Kotaro Ishi
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Zoltan Jakab

Zoltan Jakab
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Laura Jaramillo

Laura Jaramillo
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Mr. Constant A Lonkeng Ngouana

Mr. Constant A Lonkeng Ngouana
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Mr. Tommaso Mancini Griffoli

Mr. Tommaso Mancini Griffoli
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Mr. Joannes Mongardini

Mr. Joannes Mongardini
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Susanna Mursula

Susanna Mursula
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Erlend Nier

Erlend Nier
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Ms. Yulia Ustyugova

Ms. Yulia Ustyugova
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Hou Wang

Hou Wang
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, and

Mr. Oliver Wuensch

Mr. Oliver Wuensch
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Series:: Staff Discussion Notes

Volume/Issue:: Volume 2016: Issue 009

Language:: English

Publication Date:: 28 Sep 2016

DOI:: https://doi.org/10.5089/9781475537543.006

ISBN:: 9781475537543

ISSN:: 2617-6750

Pages:: 61

Keywords:: SDN; debt ratio; global economy; aggregate demand; labor market; reaction function; monetary policy; fiscal policy; incomes policy; structural reforms; financial sector policies; Canada; Japan; rate of inflation; transmission mechanism; monetary policy transmission; demand management; forecast interest rate path; interest rate path; inflation expectation; policy interest rate rate constant; demand shock; monetary policy support; Inflation; Fiscal stimulus; Accommodative monetary policy; Financial statements; Global; Asia and Pacific

Legal-disclaimer:: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate.The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.

Series:: Staff Discussion Notes

Volume/Issue:: Volume 2016: Issue 009

Language:: English

Publication Date:: 28 Sep 2016

DOI:: https://doi.org/10.5089/9781475537543.006

ISBN:: 9781475537543

ISSN:: 2617-6750

Pages:: 61

Keywords:: SDN; debt ratio; global economy; aggregate demand; labor market; reaction function; monetary policy; fiscal policy; incomes policy; structural reforms; financial sector policies; Canada; Japan; rate of inflation; transmission mechanism; monetary policy transmission; demand management; forecast interest rate path; interest rate path; inflation expectation; policy interest rate rate constant; demand shock; monetary policy support; Inflation; Fiscal stimulus; Accommodative monetary policy; Financial statements; Global; Asia and Pacific

Legal-disclaimer:: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate.The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.

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The recovery in GDP growth since the global financial crisis has been halting and weak. Concern is widespread that countercyclical policies have run out of space or lack the power to raise growth or deal with the next negative shock. This note argues that room exists for effective policies and that it should be used if appropriate. The most promising route involves a comprehensive, consistent, and coordinated approach to policy making. Comprehensive policy actions within a country exploit synergies, making the whole greater than the sum of parts. Consistent policy frameworks anchor long-term expectations while allowing decisive short- to medium-term accommodation whenever necessary. Coordinated policies across major economies amplify the helpful effects of individual policy actions through positive cross-border spillovers. The findings of this paper indicate that policy coordination adds particular value if the current approach falls short of reviving growth, or in the event of a further downward shock.

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Staff Discussion Notes

ISSN:: 2617-6750

Publisher:: International Monetary Fund

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