International monetary coordination among the Group of Seven countries periodically falls into disrepair, due partly to the processes and institutions by which each government determines exchange rate and monetary policy. This study outlines the differences in how international monetary policy is made in the United States, Germany, and Japan, and examines how those differences complicate international policy coordination.
The factors that affect exchange rate policymaking include inputs from the private sector, central bank autonomy, and the role of each country in the international system. Recommendations are made for institutional reforms that can improve cooperation. Particular attention is given to how the European economic and monetary union will affect monetary cooperation among the United States, Europe, and Japan.
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