RDP 8705: The Economics of International Policy Coordination 1. Introduction

There is a vast and growing literature on economic interdependence and the issues associated with coordinating the economic policies of the major industrial economies. Much of the recent theoretical literature on coordination has concentrated on the issue of whether coordination of macroeconomic policies between countries is better than non-coordination of policies. The first part of this paper surveys this theoretical literature. The second part briefly surveys the empirical studies that have been undertaken to assess the size and nature of potential gains to policy coordination.