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Macroeconomic Policy Interdependence and the G-20 Think Tank 20: Macroeconomic Policy Interdependence and the G-20 Izak Atiyas Badye Essid E. Fuat Keyman Raden Pardede Agnès Bénassy-Quéré Gustavo H.B. Franco Homi Kharas Jean Pisani-Ferry Suman Bery Thomas Fues Miguel Kiguel Aleh Tsyvinski Colin Bradford Paolo Guerrieri Wonhyuk Lim Peter Wolff Kemal Derviş Sergei Guriev Jacques Mistral Qiao Yu Peter Drysdale Paul Jenkins Guillermo Ortiz Yongding Yu April 2011 Think Tank 20: Macroeconomic Policy Interdependence and the G-20 Izak Atiyas Badye Essid E. Fuat Keyman Raden Pardede Agnès Bénassy-Quéré Gustavo H.B. Franco Homi Kharas Jean Pisani-Ferry Suman Bery Thomas Fues Miguel Kiguel Aleh Tsyvinski Colin Bradford Paolo Guerrieri Wonhyuk Lim Peter Wolff Kemal Derviş Sergei Guriev Jacques Mistral Qiao Yu Peter Drysdale Paul Jenkins Guillermo Ortiz Yongding Yu April 2010 COnTEnts Introduction: Macroeconomic Policy Interdependence and the G-20 . 1 Kemal Derviş Vice President, Global Economy and Development, Brookings Institution; Former Executive Head of the United Nations Development Program; Former Secretary of Treasury and Economy Minister, The Republic of Turkey; Advisor, Istanbul Policy Center, Sabanci University Homi Kharas Senior Fellow and Deputy Director, Global Economy and Development, Brookings Institution; Former Chief Economist, East Asia, World Bank argenTina World Inflation: A New Challenge for the G-20 . 6 Miguel Kiguel Former Under Secretary of Finance and Chief Advisor to the Minister of the Economy, Argentina; Former President, Banco Hipotecario; Director, Econviews; Professor, Universidad Torcuato Di Tella ausTralia Defining an Asian Agenda in the G-20 . 9 Peter Drysdale Emeritus Professor of Economics, Australian National University; Head of the East Asian Bureau of Economic Research; Co-editor, East Asia Forum Brazil Inconvenient Asymmetries . 12 Gustavo H .B . Franco Chairman and Chief Strategist, Rio Bravo Investimentos; Professor of Economics, Catholic University of Rio de Janeiro; Former Deputy Secretary of Economic Policy, Brazilian Finance Ministry; Former Governor, Central Bank of Brazil Canada Understanding Global Interdependencies: The Contribution of Economic Models . 16 Badye Essid Economist, Centre for International Governance Innovation Paul Jenkins Distinguished Fellow, Centre for International Governance Innovation China How to Formulate Guidelines for the Macroeconomic Indicators . 20 Qiao Yu Professor of Economics, School of Public Policy and Management, Tsinghua University, Beijing Think Tank 20: Macroeconomic Policy Interdependence and the G-20 i european union Concrete Steps toward Realistic Reforms of the International Monetary System . 25 Agnès Bénassy-Quéré Director, Centre d’Etudes Prospectives et d’Informations Internationales Jean Pisani-Ferry Director, Bruegel; Member, French Prime Minister’s Council of Economic Analysis; Member, European Commission’s Consultative Group of Policy Analysis; Professor, Université de Paris-Dauphine Yongding Yu Director-General, Institute of World Economics and Politics of the Chinese Academy of Social Sciences FranCe Multilateral Surveillance and Macroeconomic Policy Coordination: Designing an Appropriate Framework . 29 Jacques Mistral Professor of Economics; Head of Economic Studies, Institut Français des Relations Internationals; Former Advisor to the Directeur Général du Trésor et de la Politique économique, Ministère des finances - Paris; Member of the French Prime Minister’s Council of Economic Analysis germany Macroeconomic Policy Interdependence and Developing Countries: Is Mutual Assessment for Members Only? . 34 Thomas Fues Head of Training Department and Senior Fellow, German Development Institute Peter Wolff Head of World Economy and Development Financing and Senior Fellow, German Development Institute india Global Imbalances, Spillover Effects and External Monitoring: Some Indian Perspectives . 38 Suman Bery International Growth Centre, New Delhi and Member, Prime Minister’s Economic Advisory Council indonesia Emerging Market Economies, Macroeconomic Policy Coordination and the G-20 . 43 Raden Pardede Co-Founder, Creco Research Institute, Jakarta iTaly Macroeconomic Policy Coordination and the Generation of World Effective Demand . 48 Paolo Guerrieri Professor of Economics, University of Rome Sapienza; Professor, College of Europe, Bruges Think Tank 20: Macroeconomic Policy Interdependence and the G-20 ii korea Financial Globalization and Macroeconomic Policy Coordination . 52 Wonhyuk Lim Fellow, Korea Development Institute; Fellow, Korea National Strategy Institute meXiCo Enhancing Global Coordination . 57 Guillermo Ortiz Chairman, Grupo Financiero Banorte; Former Governor, Bank of Mexico; Former Secretary of Finance and Public Credit, Mexico; Former Ambassador of Mexico to the International Monetary Fund russia Corporate Governance of the World’s Financial System: Extend the Financial Regulation Franchise to Emerging Economies . 60 Sergei Guriev Rector, New Economic School, Moscow Aleh Tsyvinski Professor of Economics, Yale University; Professor, New Economic School, Moscow Turkey Macroeconomic Policy Coordination: Reducing External Imbalances and Difficulties and Inducing Cooperative Behavior . 63 Izak Atiyas Professor, Sabanci University E . Fuat Keyman Professor and Director, Istanbul Policy Center, Sabanci University uniTed StaTes The Global Rebalancing and Growth Strategy Debate . 68 Colin Bradford Nonresident Senior Fellow, Global Economy and Development, Brookings Institution; Senior Fellow, Centre for International Governance Innovation Think Tank 20: Macroeconomic Policy Interdependence and the G-20 iii Macroeconomic Policy Interdependence and the G-20 Vice President, Global Economy and Development, Brookings Institution; Former Executive Kemal Derviş Head of the United Nations Development Program; Former Secretary of Treasury and Economy Minister, The Republic of Turkey; Advisor, Istanbul Policy Center, Sabanci University Senior Fellow and Deputy Director, Global Economy and Development, Brookings Homi Kharas Institution; Former Chief Economist, East Asia, World Bank Challenges of Interdependence coordination through some form of multilateral surveillance, as well as global forecasts and re- Global interdependence has increased in many search on global economic issues . At the IMF, there domains, such as the spread of infectious disease, is also a long tradition of promoting the develop- nuclear threats, climate change and the manage- ment of prudential standards for the financial sec- ment of the global economy . In each area, there tor or prescriptions for prudent fiscal policy . Until exist large spillover effects across national borders recently, however, member states have not given that have prompted efforts to come up with global- strong support to the multilateral dimension of ly coordinated solutions . In the economic domain, these efforts . some of these efforts have either been enshrined in legally binding treaties, as in the case of trade rules The 2008 crisis pointed to the deficiencies in the that the Word Trade Organization has been set up institutional arrangements for dealing with fi- to provide and enforce, or conventions and norms nancial crises and global macroeconomic inter- for behavior as in the case of the Basel Committee dependence . With regard to the financial sector, guidelines for the banking sector or rules relating the Financial Stability Forum has been expanded to health issues coordinated by the World Health and transformed into the Financial Stability Board Organization . (FSB), and working with the IMF and the Group of Twenty (G-20), it is to provide global rules for reg- The great financial crisis of 2008 and the ensuing ulating the financial sector . While much still needs recession that hit large parts of the world economy to be done, the framework for tackling the issues highlighted the importance of macroeconomic appears set in place . The same cannot be said for and financial stability as global public goods . Fi- managing global macroeconomic interdepen- nancial problems are highly contagious in a world dence, or what is often somewhat loosely called where financial institutions have become global “global macroeconomic imbalances” . Until 2009, and systemically important, where capital flows the efforts by the IMF to strengthen its multilateral move back and forth in huge amounts across bor- surveillance processes did not in the past receive ders, and where derivatives of various sorts tie the needed degree of support from shareholders . markets together in novel ways that always seem But the G-20 did decide at the Pittsburgh Summit one step ahead of regulatory authorities . The re- in the fall of 2009 to deal with macroeconomic cession also highlighted the importance of coordi- policy interdependence through a new Mutual As- nated global demand management through fiscal sessment Process involving member nations, with and monetary responses to the global downturn a facilitating role for the IMF . That, broadly, is the and, more broadly, of the need to buttress global topic of the collection of short essays in this vol- confidence in the system and avoid self-reinforc- ume . ing downward spirals . At the outset, it is important to set realistic ex- The International Monetary Fund has long at- pectations for what the G-20 can hope to achieve . tempted to encourage macroeconomic policy The limited progress of consultations under IMF Think Tank 20: Macroeconomic Policy Interdependence and the G-20 1 multilateral surveillance in the past1
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