Recent research by economists with the International Monetary Fund highlights the increasingly complex web of connections among advanced and emerging economies – connections that hold both hazards and benefits.
Diane Lim Rogers, chief economist for The Concord Coalition, notes that cross-border financial connections can reduce an individual country’s vulnerability to local shocks. But when major economic players are involved, she says, significant financial risks can be quickly transmitted around the global system.
In a blog post yesterday, Rogers also pointed out that national economies are often fighting similar ailments.
“The U.S. is watching Europe with keen interest, not just because we are afraid of the negative spillover from a deeper European recession, but because European countries are sparring and struggling over how to get to greater fiscal sustainability at a time when their economies are so fragile,” Rogers writes. “Sound familiar?”
Leaders at last week’s G20 summit in Mexico emphasized the need for cooperation and collective action to promote growth. They were also mindful, Rogers writes, of the tension between short-term and long-term economic goals.