policy coordination

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The collaborative choice of policy by two or more policy-makers. Policy coordination between countries can be justified by the argument that national fiscal and monetary policies would produce better results if countries collaborated. This is because the fiscal and monetary policies followed in each country have effects abroad as well as at home. These externality effects are ignored in the choice of policy if countries act independently. Policy coordination produces better results by taking the externalities into account.

Subjects: Economics — Politics.

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