Containing Competitive Monetary Easing
In a world where debt overhangs and the need for structural reform are constraining domestic demand, unconventional monetary policies have profound spillover effects – and prompt damaging responses. The only way to break the destabilizing cycle of monetary expansion and retaliation is to increase global monetary-policy coordination.
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MUMBAI – As the world struggles to recover from the global economic crisis, the unconventional monetary policies that many advanced countries adopted in its wake seem to have gained widespread acceptance. In those economies, however, where debt overhangs, policy is uncertain, or the need for structural reform constrains domestic demand, there is a legitimate question as to whether these policies’ domestic benefits have offset their damaging spillovers to other economies.