In light of international policy coordination, we need to bear in mind that, if an individual country pursues domestic economic policies without considering negative externalities, it is highly likely that the country will fall into a prisoner’s dilemma trap and that the world economy will reach a sub-optimal multi-local equilibrium. Concluding remarks Historically, an economic crisis has generally led to a crisis in economics.
Before the outbreak of the recent global financial crisis, neither economists nor economic agencies had a full understanding of housing market speculation and they were unable to arrive at a correct prediction of the outcomes resulting from banks’ behavior and their competitive structure.