{ "title": "The Elusive Quest for International Policy Cooperation", "publication": "IMF Blog, March 26, 2015", "sourceUrl": "https://www.imf.org/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation", "canonical": "https://www.imf.org/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation", "overlayPath": "/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/index.md", "summary": "Publication: The Elusive Quest for International Policy Cooperation", "sections": [ { "heading": "Overview", "content": "- Publication: The Elusive Quest for International Policy Cooperation\n- Authors: Olivier Blanchard, Mahvash S. Qureshi, Atish Rex Ghosh\n- Date: March 26, 2015\n- Central metaphor: International policy cooperation compared to \"Nessie, the lovable Loch Ness monster\": oft-discussed, seldom seen." }, { "heading": "Definitions and degrees of \"cooperation\"", "content": "- Cooperation can mean different things:\n - Explaining the logic of domestic policy actions to others — transparency (notably by central banks).\n - Creation of multilateral institutions and arrangements — e.g., central bank swap lines and new IMF liquidity provision facilities set up after the global financial crisis.\n - Setting and following well-defined \"rules of the road\" — largely absent since the breakdown of the Bretton Woods system; existing principles are too vague and undermined by conceptual disagreements (example: determining equilibrium exchange rates and how far is \"too far\").\n - Economists' preferred meaning: moving from the Nash to the coordinated equilibrium — the highest degree of cooperation.\n\n- Historical coordinated episodes (few sightings of Nessie in the past forty years):\n - Bonn\n - Plaza\n - Louvre\n - Group of Twenty fiscal stimulus in the wake of the global financial crisis" }, { "heading": "Five key insights from the IMF panel discussion", "content": "- Constants in a changing world\n - Core challenges persistent across decades: facilitating external adjustment; ensuring an equitable burden of adjustment between surplus and deficit countries; regulating the supply of global liquidity.\n - These challenges have magnified with increased financial integration, growing volume of private capital flows, and emergence of complex financial systems prone to excesses.\n\n- Misaligned incentives\n - Countries coordinate when they are \"scared together\"; incentives to coordinate fade once immediate threat recedes.\n - Coordination is easier when countries move policies that would be individually in their self-interest regardless of others, albeit with potentially greater collective benefit if acting together.\n - Coordination is harder when it requires governments to implement policies that depart from their unilateral choices and only make sense if all parties deliver on commitments.\n - Examples: Group of Twenty coordinated fiscal expansions during the global financial crisis; agreement on financial sector regulation such as the Basel agreements.\n\n- Net and gross\n - Coordination has typically followed when net flow imbalances and exchange rate misalignments were apparent.\n - Important vulnerabilities can build up from gross positions long before net imbalances become visible—through cross-border bank flows and oversized banking systems.\n\n- Stretching the truth\n - Deliberate disagreements about cross-border multipliers are a major obstacle to coordination, beyond genuine uncertainty.\n - A respected third party providing unbiased analysis of domestic and cross-border effects—a \"neutral assessor\"—could help build consensus.\n - Whether the IMF could serve as that neutral assessor is an open question; improved analysis of cross-border spillovers is recommended.\n\n- Keep it simple\n - Given coordination obstacles, simple \"rules of the road\" indicators (for example, based on reserves accumulation or current account balances) may be more effective than attempting theoretically-optimal, tailor-made cooperative solutions.\n - Analogous to the \"Volcker Rule\" in domestic finance.\n - Questions remain about how simple such rules should be and, especially for sovereigns, how to enforce them." }, { "heading": "Policy implications and next steps", "content": "- Recognize formidable obstacles to international policy cooperation, including domestic institutional frictions (e.g., cooperation among monetary, fiscal, and macroprudential authorities).\n- Historical parallels: global cooperation in international health and trade progressed over decades through building technical and political consensus.\n- Recommended direction:\n - Be persistent and build on existing institutions and modalities, such as the IMF's Integrated Surveillance Decision and multilateral surveillance products.\n - Improve analysis of cross-border spillovers and consider the role of a neutral assessor to reduce deliberate disagreement about multipliers.\n - Pursue practical, simple \"rules of the road\" to secure superior outcomes, while addressing questions of design and enforcement.\n- Conclusion: Not likely to spot Nessie any time soon, but efforts to find her continue.\n\nOlivier Blanchard, Mahvash S. Qureshi, Atish Rex Ghosh; March 26, 2015 — https://www.imf.org/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation\n\n---\n\n Content in this bundle\n\n- Staff Discussion Note\n - Staff Discussion Note (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Staff Discussion Note (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Loch Ness monster\n- gross positions\n- Integrated Surveillance Decision\n\nSource: https://www.imf.org/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/index.md)", "[Structured JSON version](/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/index.json)", "[Bundle manifest](/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/bundle-manifest.json)", "Authors: Olivier Blanchard, Mahvash S Qureshi, Atish Rex Ghosh", "Published: March 26, 2015", "Publication: The Elusive Quest for International Policy Cooperation", "Authors: Olivier Blanchard, Mahvash S. Qureshi, Atish Rex Ghosh", "Date: March 26, 2015", "Central metaphor: International policy cooperation compared to \"Nessie, the lovable Loch Ness monster\": oft-discussed, seldom seen.", "Cooperation can mean different things:", "Historical coordinated episodes (few sightings of Nessie in the past forty years):", "Constants in a changing world", "Misaligned incentives", "Net and gross", "Stretching the truth", "Keep it simple", "Recognize formidable obstacles to international policy cooperation, including domestic institutional frictions (e.g., cooperation among monetary, fiscal, and macroprudential authorities).", "Historical parallels: global cooperation in international health and trade progressed over decades through building technical and political consensus.", "Recommended direction:", "Conclusion: Not likely to spot Nessie any time soon, but efforts to find her continue.", "**Staff Discussion Note**", "[Loch Ness monster](http://blogs.imf.org/2013/12/15/international-policy-coordination-the-loch-ness-monster/)", "[gross positions](http://www.imf.org/external/pubs/ft/fandd/2015/03/white.htm)", "[Integrated Surveillance Decision](http://www.imf.org/external/np/exr/facts/isd.htm)" ], "related": [ { "title": "Staff Discussion Note", "role": "note", "sourceUrl": "http://www.imf.org/external/pubs/ft/sdn/2013/sdn1311.pdf", "summary": { "path": "/external/pubs/ft/sdn/2013/sdn1311.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/pubs/ft/sdn/2013/sdn1311.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/index.md", "json": "/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/index.json", "bundleManifest": "/en/blogs/articles/2015/03/26/the-elusive-quest-for-international-policy-cooperation/bundle-manifest.json" }, "generatedAtUtc": "2026-08-28T01:41:31.685Z" }