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July 7, 2006
JS-4353
The Evolution of the G-7 and Economic Policy Coordination
The growth of global economic imbalances has generated much talk about how the situation can possibly be unwound gradually or in an orderly manner. Perceived currency misalignments appear to be increasing protectionist pressures. In the face of these challenges, some look back wistfully to the time of the Plaza Agreement. Some analysts are even calling for a Plaza-like "coordination" agreement to promote an orderly reduction in global imbalances.3 At the same time, the G-7 major economies that have traditionally participated in macroeconomic policy coordination and thereby took on such challenges for the global system no longer carry as much economic weight in the global economy as they once did. Indeed, as key emerging market economies play a larger and growing role on the global economic scene, they are now a more critical part of the global imbalance equation.
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