Research On G20 International Macroeconomic Policy Coordination Mechanism

The famous “invisible hand ” in economy emphasizes the market is a good way to organize economic activities which can be carried out in a fully competitive market.The market players, as a rational economic man,can make the transaction in the command of the invisible hand according to the principle of maximizing interests. But if the “invisible hand” applied to the international macroeconomic policy coordination, this hand will have a failure phenomenon. As global economic integration makes the link between the countries more closely, a country’s macroeconomic policies will not act only on the domestic, but will have an impact on the economy through spillover effects to other countries. If each country makes policies on their own, which will result in " beggar thy neighbor " policy and lead to a reduction of global economic welfare. Therefore, it is very important to study the macroeconomic policy coordination between countries to promote global economic development.Along with the deepening of economic globalization, international macroeconomic policy coordination mechanisms are evolving. 2008 outbreak of the global financial crisis once again highlights the need for international macroeconomic policy coordination. In order to deal with the crisis, countries united with each other to promote a new international macroeconomic policy coordination mechanisms-G20 summit. The world’s major developed and developing countries through the G20 platform for a wide range of macroeconomic policy coordination, effectively avoid the further spread of the crisis. G20 gradually replaced the G7 as a new mechanism for international macroeconomic policy coordination. Therefore, I choose G20 as the study angle of international macroeconomic policy coordination mechanism.The study of the history of G20,the features of G20,the operation of G20,the issues of G20 helps to understand the way of G20 coordination. The study of outcome of G20 helps to understand the role of G20 among the international macroeconomic policy coordination field. According to the exposing problem in the effectiveness analysis can make the reform plan for G20.This paper reviews the basic theories: Game Theory Optimal policy analysis proved the need of international macroeconomic policy coordination- the Nash equilibrium is a Pareto inefficient non-cooperative equilibrium, Mundell-Fleming model proved spillover effects of monetary policy, Hamada model suggested policy cooperation could bring welfare improvements. Secondly, an overview of the four stages of development in international macroeconomic policy coordination mechanisms: the period of the gold standard, Bretton Woods period, G7 system period, G20 system period. Then describes something about G20:the history of the evolution, features, operation mechanism, agenda-setting.G20 has features like representative members and flexible operation.The members of G20 can be divided in different clique countries Finally, analyze the effectiveness of reforms of G20 macroeconomic policy coordination and reform measures of G20.Analyze the opportunities and challenges of China and put some proposals. China’s participation in G20 international macroeconomic policy coordination mechanism should make full use of G20 platform and expand more cooperation mechanisms. By laying out a wider range of economic and financial network can improve China’ right in the global economic governance.