Foundations of macroeconomic policy coordination: fostering dialogue as a policy tool in Latin America

Abstract

This paper examines the theoretical foundations for macroeconomic policy coordination and the related empirical findings in Latin America, contributing an original analysis that advocates new dialogue mechanisms to facilitate coordination in this region. The theoretical survey is concerned with non-cooperative coordination games, including dynamic games and those with imperfect information. The practical value of these game-theoretic tools is illustrated using economic examples. One important result is that implementing different forms of dialogue in specific situations can help to reach a coordinated outcome with benefits across the board. This is argued to be especially relevant for macroeconomic policy coordination in Latin America because recent initiatives to advance the process of regional economic integration have strengthened the links between countries, creating new challenges for policy coordination.