Economic Policy Cooperation Vital to Global Recovery

IMF helps G-20 countries examine each other's policies to boost growth

Acid test for policy cooperation as leaders meet in November

IMF studies how 5 biggest economies policies affect each other

Lipsky, giving the annual Stavros Niarchos Foundation lecture at the Peterson Institute for International Economics—a Washington, D.C-based think tank—said effective policy coordination promises to be a mutually beneficial proposition.

“Policy cooperation is not based on the notion of sacrificing for the general good,” said Lipsky. “The basic premise that if the G-20 members act coherently, they can produce an outcome that is better for each of them.”

Leaders of the Group of Twenty (G-20) advanced and emerging economies have met five times, including the first Leader Summit in November 2008,in order to collaborate on a their policy response to the unfolding economic and financial challenges. While the crisis resulted from failures in both the public and private sectors, the rapid global reaction and policy response is credited with preventing the crisis from becoming substantially more acute. The IMF and the G-20 are working to sustain the recovery, both independently and together.

Lipsky became acting managing director of the IMF after the resignation of Dominique Strauss-Kahn on May 19.

Global crisis, global solutions

At their summit in Pittsburgh, Pennsylvania in September 2009, G-20 leaders created a blueprint for policy cooperation, known as the multilateral assessment process, to help build strong, sustainable and balanced growth.

Countries’ economic conditions have begun to improve after the global economic crisis, but their recovery remains fragile and uneven. This uneven recovery makes policy collaboration more difficult, but no less important.

Lipsky said one of the strengths of the blueprint is that policy plans are being consulted among the G-20 members, and a mechanism is being created for the participating countries to review their partners’ policy implementation and to readjust their action plans according to developments.”

At present, IMF staff—working with the G-20 countries—is analyzing the policies of seven systemic economies whose actions influence global economic imbalances.

The next G-20 leaders’ summit will take place in Cannes, France in November 2011, which Lipsky described as “a key stage in the upcoming acid test for policy cooperation under the mutual assessment process.”

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