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obstacles to successful international economic policy coordination

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What are some obstacles to successful international economic policy coordination in terms of current global economic and political policies and their impact on business decisions?

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Economics, Economic Policy

What are some obstacles to successful international economic policy coordination?
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What are some obstacles to successful international economic policy coordination in terms of current global economic and political policies and their impact on business decisions?

Answer:

There are some obstacles to successful international economic policy coordination. We are discussing them as follows:

The first obstacle to successful and meaningful coordination is the difficulty of ensuring compliance. Each country, if it takes the other's policy as given, has an incentive to "defect" by following a restrictive policy and leaving the burden of expansion to the other.
The second obstacle that threatens the success of Coordination effects the risk that cooperative agreements will be biased in favor of expansion, with the result that high inflation rates will re-emerge. The argument is that if governments set up the machinery for joint welfare maximization period-by-period, the cooperative equilibrium in each period is likely to entail a greater degree of expansion than the Nash non-cooperative equilibrium, as countries lose the inhibitions of worsened trade balances. Governments may find this joint expansion advantageous within any given period, ...

Solution Summary

What are some obstacles to successful international economic policy coordination in terms of current global economic and political policies and their impact on business decisions?

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