Nevertheless, a multilateral approach will remain the best way to manage global economic policy making
In a world of progressively more multipolar economic growth and financial centers, interdependency will be the operating norm even more than at the present, bringing new challenges for economic diplomacy, national economic policy making, and management of transnational capital channeled across national borders. The potential for rising competition among power centers that is inherent in the shift to a more multipolar world makes it especially important to improve the design of policy coordination across economies— both developing and developed. More generally, as global economic integration increases, so, too, do spillovers of monetary and fiscal policies across countries. Thus, policy coordination is needed not only to improve the average performance of the global economy, but also to avert the attendant risks. Countries should move quickly to better coordinate their responses to global imbalances, to improve financial regulation, and to expand mutual surveillance of macroeconomic policies. To the extent that the vulnerability that comes with interdependence can be managed through appropriate responses by international institutions and multilateral agreements—such as the provision of emergency financial assistance and commitments to open-door policies to ensure access to international markets—interdependence can lead to a shared increase in global prosperity.
Even in the absence of fundamental reform in international policy coordination, a number of concrete steps could be taken to further the coordination framework put into place by the Group of 20 (G-20) and to preserve the gains made in central bank collaboration and harmonization of financial regulations during the 2008–09 financial crisis. Importantly, coordination should focus on outcomes that would be mutually benefi cial to a large number of countries— that is, on international public goods, such as environmentally friendly technologies—rather than on zero-sum variables, in which a gain for one country implies a loss for another. Only by recognizing that multilateral coordination has welfare-enhancing benefi ts for all will countries voluntarily take into account the concerns of other countries.