II.THE BACKGROUND TO BONN '85

The policy response to the second oil shock of 1979-80 was--unlike that to the first--synchronized and targeted solely at fighting inflation. Monetary policy became a central instrument of control, most visibly in the U.S., with the appointment of Paul Vo

The rebound from the severe 1982 recession was initiated by the strongly expansionary fiscal policy of the Reagan administration launched in a vision of supply-side euphoria, and by an easing of monetary policy in the U.S. provoked by the eruption of the

The strikingly divergent growth pattern which resulted from the differing recovery impulses produced a number of serious, indeed gross, imbalances. Most dramatic was the sharply contrasting current account positions as between the U.S., with its unprecede

It was these gross imbalances in the international economy and the strains they induced--rising protectionist pressures in the U.S., the systemic threat of the global debt problem and a growing fear of an exchange rate crisis--that confronted the heads of

On the macro front a unilateral U.S. solution--i.e., a reduction in the fiscal deficit--had been the standard prescription of all summits since Reaganomics startled the world. But unilateral action to achieve the much desired "soft landing" of the dollar,