GEI Projects

3. GLOBAL INSTITUTIONS AND ECONOMIC POLICY COORDINATION

Principal Investigators

Professor DAVID CURRIE
Mr STEPHEN HALL
Professor JOHN WHITLEY
London Business School

Contact

Alison Cheyney
London Business School
Sussex Place
London NW1 4SA

Tel: 020 7262 5050 ext. 3440
Fax: 020 7402 0718
Email: dcurrie@lbs.lon.ac.uk

Duration of Research

3 years

AIMS AND OBJECTIVES

To evaluate the effectiveness of current international institutions in facilitating cooperation on macroeconomic and related polices; to consider what rules are appropriate for managing coordination failures in the world economy; and to consider how global institutions should evolve in order to enhance the effectiveness of international policy.

STUDY DESIGN

The research is drawing on a variety of techniques of applied macroeconomic policy analysis to evaluate global economic institutions. One strand uses tightly specified theoretical models to evaluate key international externalities and policy coordination failures, and applies game theoretic techniques to these models. A particular focus here will be the integration of the analysis of policy coordination issues with international endogenous growth models. A second uses the largescale international econometric model, GEM, to analyse these same issues in an empirical setting, with a view to deriving robust policy conclusions. A third strand uses econometric techniques to analyse issues of convergence and divergence in the international economy.

POLICY IMPLICATIONS

The policy conclusions of the project will fall into several parts. One part will concern the effectiveness of current arrangements for coordinating international macroeconomic policy. This will distinguish the short-term, macroeconomic stabilization aspects of international coordination from the longer term, structural aspects. It will also include an appraisal of the regional aspects of international coordination: whether, in particular, the spillovers between the main G3 blocs are such that G3 coordination failures are relatively unimportant, and the main focus for coordination should be at a regional level.

A second strand will draw conclusions about how policy coordination can be improved emphasizing in particular the effectiveness of alternative policy designs in enhancing international growth.