International Monetary Policy Coordination:
Past, Present and Future
This paper examines two explanations for the recent spate of complaints about crossborder
monetary policy spillovers and calls for international monetary policy coordination, a
development that contrasts sharply with the monetary system in the 1980s, 1990s and until
recently. The first explanation holds that deviations from rules-based policy at several central
banks created incentives for other central banks to deviate from such policies. The second
explanation either does not see deviations from rules or finds such deviations benign; it
characterizes recent unusual monetary policies as appropriate, explains the complaints as an
adjustment to optimal policies, and downplays concerns about interest rate differentials and
capital controls. Going forward the goal should be an expanded rules-based system similar to the
1980s and 1990s which would operate near an international cooperative equilibrium.
International monetary policy coordination—at least formal discussions of rules-based policies
and the issues reviewed here—would help the world get to this desirable situation.