(DP 1998-08) Globalization and the Limits to National Economic Management

Abstract

The emerging world environment with relatively freer flows of goods and finance has tremendous implications for macroeconomic management. Among others, both direct fiscal and monetary control are more difficult in an environment where individuals and firms have much greater ability to rearrange their portfolios, even across national boarders. Under these conditions, policy makers must depend less on direct control over macroeconomic magnitudes and count more on influencing the fundamental factors affecting macroeconomic changes.