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Global Linkages
Macroeconomic Interdependence and Cooperation in the World Economy
Authors:
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Publisher:
2011
Summary
With the rapid deterioration of the U.S. trade balance in the 1980s, the United States was forced to finance deficits by borrowing heavily from the rest of the world. In doing so, the United States went from being the world's largest creditor country to the world's largest debtor, while Japan and West Germany experienced a rise in trade surpluses. Such a shift in international trade flows has had profound effects on the world economy. McKibbin and Sachs address a range of issues involving macroeconomic imbalances in the world economy. Through the use of a new simulation model of the world economy they explore how policy actions undertaken in one country affect the trade flows and macroeconomic patterns among the other counties. The authors show that key macroeconomic features of the 1980s can be explained by shifts in monetary and fiscal policies in the major economies and by supply shocks due to changes in oil prices. In addition to showing how the global macroeconomic experience can be understood, they focus on a number of current policy issues, including the reduction of global trade imbalances, the consequences of U.S. fiscal consolidation, the effects of an oil price shock, the implications for the U.S. economy of increases in Japanese and German fiscal spending, the effects of targeting exchange rates among the major currencies, and the gains of increased coordination of macroeconomic politics among the major economies. In several cases, their conclusions are shown to be quite different from those that form the basis of many conventional views. The authors also analyze the importance of interaction between policymakers in industrial economies and conclude by reemphasizing the need for U.S. politicians and policy experts to recognize that macroeconomic results in the U.S. now depend heavily on events abroad.
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Bibliographic data
Copyright year
2011
ISBN-Print
978-0-8157-5601-9
ISBN-Online
978-0-8157-1668-6
Publisher
Rowman & Littlefield, Lanham
Language
English
Pages
277
Product type
Book Titles
Table of contents
ChapterPages
Contents No access
Background to the Study No access
Plan and Main Results of the Study No access
Short-run Macroeconomic Interdependence No access
Intertemporal Linkage No access
The Supply Side No access
Summary No access
History, Methodology, and Overview No access
The Model No access
Calibration and Model Solution No access
Summary No access
Fiscal Policy Transmission No access
Monetary Policy Transmission No access
OPEC Oil Price Rise No access
Cessation of Lending to Non-Oil Developing Countries No access
Summary and Comparison with Other Models No access
The World Economy, 1978–89 No access
Tracking Procedure No access
Tracking Results No access
Summary No access
A Model-Generated Senario for 1986–93 No access
The Possibility of a Hard Landing No access
Global Macroeconomic Repercussions of Alternative Policies to Shrink the U.S. Trade Deficit No access
U.S. Fiscal Contraction No access
U.S. Fiscal Adjustment with Foreign Monetary Policy Response No access
U.S., Japanese, and German Fiscal Adjustment with Monetary Policy Response No access
A Policy of Forcing Down the Dollar No access
A U.S. Tariff against Japanese Imports No access
Summary No access
Overview of Existing Theoretical Approaches No access
Illustration of a Static Game No access
Implications of Adding Dynamics No access
On the Role of Uncertainty No access
Summary No access
Appendix: Solution of the Two-Country Dynamic Model No access
Other Studies No access
Measuring the Gains to Coordination No access
Two Examples of Cooperation versus Noncooperation No access
Summary No access
Policy Regimes No access
Results for Key Variables No access
Summary No access
Lessons No access
Further Work No access
A. The MSG2 Model of the World Economy: Model Listing No access
B. Detailed Simulation Results No access
C. Numerical Solution of Models with and without Strategic Behavior No access
