International Monetary Policy Coordination

Abstract

A conspicuous feature of the post-war period has been the sustained tendency for the international economy to become increasingly interdependent. The general reduction in trade barriers and the almost complete removal of capital controls have resulted in highly integrated production activities, trade and financial flows with dramatic consequences for domestic-demand management. Persistent trade imbalances together with recent large-scale fluctuations of the major trading currencies have highlighted the international character of the linkages between domestic policy implementation and the economic performance of the main industrial nations, and many would now argue that these international links have become so strong as to impose severe limits on the degree of control and the scope for independent policy action on the part of individual governments.