Skip to content
European University Institute - Robert Schuman Centre for Advanced Studies - Department of Economics

International policy coordination during disinflation

Pierre Werner Chair Giancarlo Corsetti has recently co-authored a blog post for the Centre for Economic Policy Research that analyses why countries’ monetary policies tend to address the current inflation crisis with a strict national focus, instead of looking for cooperation.

16 February 2023 | Opinion

Image of  laptop displaying the blog post 'International policy coordination during disinflation', co-authored by Giancarlo Corsetti

This piece by Professor Giancarlo Corsetti and Riccardo Trezzi was published on 16 February 2023 and questions whether some form of coordination in stabilisation policy would be necessary to reduce major economic risks.

"The rapid pace at which central banks across the world have been increasing policy rates in response to rising inflation has raised concerns about the disruptive effects of cross-border spillovers. Everything else equal, a monetary contraction in a country tends to raise inflation and reduce activity abroad. When the contraction originates in a systemically important country like the US, it drives risk premia and deteriorates borrowing conditions in global markets. This magnifies the risk of turmoil in sovereign and external debt markets, especially, but not exclusively, in emerging market economies and less developed economies. The main concern is that if central banks fail to internalise cross-border spillovers, their actions may result in excessive contraction worldwide and create debt crises– a risk that could be moderated, if not avoided altogether, by coordinating the anti-inflationary stance."

Continue reading the full piece.

Last update: 16 February 2023

Go back to top of the page