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Problems of international policy coordination
The previous section presented examples countries which were motivated to overcome Pareto inefficiency by coordinating their economic policies, rather than acting unilaterally. Despite the potential welfare gains from such coordination there are a number of problems that need to be overcome before these gains are realised. In this section we look at why these problems arise and how they might be solved.
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Inflationary Bias Another potential problem with the coordination of monetary policy is that it can worsen the inflationary bias within each country. If the costs associated wi
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