A return to international policy coordination in the age of secular stagnation

The interdependence of economic policies calls for international policy coordination. This paper reviews various patterns of macroeconomic interdependence and policy coordination during the fixed as well as the flexible exchange rate. There was a period where laissez-faire policies rather than policy coordination were required under the flexible rate. After the Lehman Crisis, however, insufficient attention to this interdependence by the Bank of Japan, for example, brought considerable damage to the Japanese economy from this difficulty through excessive appreciation of the yen. Governor Kuroda rescued the Japanese economy with his quantitative easing (QE) during 2013–2015. But, after the zero or minus interest rate, the world economy plunged into the age of secular stagnation that may require macro-policy coordination of fiscal expenditures, possibly supported by the Yield Curve Control.