POLICY CONFLICT, INCONSISTENT GOALS, AND THE CO-ORDINATION OF ECONOMIC POLICIES*
Graduate Institute of International Studies
Simultaneous achievement of internal and external balance by the world’s – or a currency area’s – economies constitutes a major problem for economic policy. This problem must be solved if international economic disintegration is to be avoided. It is particularly acute when increasing economic integration is pursued under a regime of fixed exchange rates – as it would be under a scheme of regional monetary integration.
Indeed, the optimum currency-area question was originally raised in this context: the benefits of having a single currency are balanced against the internal adjustment costs ...