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State the International policy coordination
In an international context governments can, in theory, offset adverse spillover effects originating from other nations. With fewer instruments than objectives this is not possible and the resulting inefficiency may be characterised by either expansionary or contractionary bias. Which of these occurs depends on whether the spills over effects are positive or negative, and the objective of the government's involved. International policy coordination offers the prospect of increasing the welfare of all countries involved by taking the spillover effects explicitly into consideration when determining each country's optimal monetary policy
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