The End of Monetary Dominance? How Crises Can Influence Monetary Policy Decisions and Institutions

CIGI Policy Brief #10

November 29, 2008

History can repeat itself. The last two decades have seen monetary policy as dominant policy while fiscal policy has taken a back seat. The ongoing financial crisis may well sow the seeds of a return to fiscal dominance. In addition, there are renewed calls for greater international policy coordination. While cooperation is desirable, coordination often breaks down, as it did with the Bretton Woods regime some politicians are hoping to revive in a form that has yet to be determined. There are considerable risks that accompany both developments based on the historical experience and the tendency for countries to defend their sovereignty over financial and monetary matters.

About the Author

Pierre Siklos is a CIGI senior fellow. His research interests include applied time series analysis and monetary policy, with a focus on inflation and financial markets.