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The Impact of Interdependence on Economic Policy Design: The Case of the US, EEC and Japan

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  • Hughes Hallett, Andrew

Abstract

The world's industrialised economies have become increasingly interdependent over the past 30 years. The policy implications of this mutual dependence obviously depend on the spillover effects between economies: but work on this topic has used simplified models of hypothetical economies, and has therefore failed to clarify the implications of interdependence for policy choices. This paper applies different strategies to linked models of the United States, EEC and Japanese economies to evaluate the importance of spillover effects in policy design. The results indicate that interdependence has strong but asymmetric effects due to differing degrees of market flexibility. The United States performance dominates, while Japanese policies have little impact on the rest of the world. Matching policies produces poor results.

Suggested Citation

  • Hughes Hallett, Andrew, 1986. "The Impact of Interdependence on Economic Policy Design: The Case of the US, EEC and Japan," CEPR Discussion Papers 108, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:108
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    Cited by:

    1. Peter McAdam, 2007. "USA, Japan and the Euro Area: Comparing Business-Cycle Features," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 135-156.
    2. Patrick Artus, 1992. "Passage à l'union économique et monétaire en Europe : effets sur la croissance et les politiques budgétaires," Économie et Prévision, Programme National Persée, vol. 106(5), pages 123-137.
    3. J. Mcclure, 1994. "The Feldstein-Horioka puzzle: The IS-LM model with optimal policy," Open Economies Review, Springer, vol. 5(4), pages 371-382, October.
    4. Andrew Hughes-Hallett & Patrick Minford, 1990. "Target zones and exchange rate management: A stability analysis of the European Monetary System," Open Economies Review, Springer, vol. 1(2), pages 175-200, June.

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