The Dog That Didn’t Bark : The Strange Case of Domestic Policy Cooperation in the "New Normal"

This paper examines domestic policy cooperation, a curiously neglected issue. Bothinternational and domestic cooperation were live issues in the 1970s when the IS/LMmodel predicted very different external outcomes from monetary and fiscal policies.Interest in domestic policy cooperation has since fallen on hard intellectual times—withknock-ons to international cooperation—as macroeconomic policy roles became highlycompartmentalized. I first discuss the intellectual and policy making undercurrents behindthis neglect, and explain why they are less relevant after the global crisis. This is followedby a discussion of: macroeconomic policy cooperation in a world of more fiscal activism;coordination across financial agencies and with macroeconomic policies; and howstructural policies fit into this. The paper concludes with a proposal for a "grand bargain"across principle players to create a "new domestic cooperation."