After the Fall: Lessons for Policy Cooperation from the Global Crisis

June 10, 2014

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Format: Chicago

Tamim Bayoumi. After the Fall: Lessons for Policy Cooperation from the Global Crisis, (USA: International Monetary Fund, 2014) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

A crisis is a terrible thing to waste, and nowhere is this truer than in the arena of international economic policy cooperation. With the world facing the largest and most synchronized plunge in output of the postwar era, policy makers banded together to find solutions. This paper looks at the lessons from what did—and did not—occur in the area of policy cooperation since the crisis. Outcomes seem to be weaker over time in areas such as macroeconomic policies, where institutional procedures were less well defined and there were disagreements over spillovers. By contrast, cooperation seems to have been most effective where there was a consensus that such policies could avoid the risk of highly detrimental outcomes and institutional arrangements were more concrete. Principle amongst these was trade, but bank capital buffers, IMF resources, and derivatives exchanges also fall into this category. Lessons for those interested in promoting cooperation seems to be: it may be more fruitful to: focus on the potential for major costs from a lack of cooperation, rather than the minor gains from fuller coordination; strive for more consensus estimated spillovers; convince policy-makers costs of loss of cooperation are large; and focus on building better and more enduring institutional arrangements.

Subject: Banking, Commercial banks, Emerging and frontier financial markets, Financial institutions, Financial markets, Financial sector policy and analysis, Financial sector stability, Fiscal policy, Fiscal stimulus

Keywords: C. Policy mix, Central bank, Central bank swap lines, Commercial banks, Domestic policy, Emerging and frontier financial markets, Europe, Fed swap lines, Financial sector stability, Fiscal stimulus, G20 industrial nations, Global, Institutuinal coarregements, Market, Policy, Policy cooperation, Policy spillovers, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/097
Stock No:

WPIEA2014097
ISBN:

9781498375764
ISSN:

1018-5941

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