Can coordination in the G-20 help countries to reduce debt and deficits?

Adam Triggs

G-20 countries added $33 trillion to the global stock of debt from 2007 to 2018, more than double the pre-crisis level. The paper explores whether coordination in the G-20 could help countries to reduce their debt and deficits. The answer to this question depends on the answers to several other questions: has the G-20 been successful in its previous attempts at coordinated fiscal consolidation? Is there an economic case for coordinated fiscal consolidation in the first place? Does coordination ease the pain of fiscal consolidation or make it worse? Is there some form of coordination (a global ‘grand bargain’) between G-20 countries that could help? Is this politically feasible? And does the G-20 influence the fiscal policies of its members in the first place? The paper explores these questions using data analysis, a new multi-country, multi-sector, intertemporal computable general equilibrium framework called the G-Cubed (G-20) model, and the results from in-depth interviews with 61 politicians and officials from across all G-20 countries, including Kevin Rudd, Janet Yellen, Haruhiko Kuroda, Ben Bernanke, Jack Lew, Mark Carney, and 55 others. The paper finds that G-20 coordination can indeed help countries to reduce their debt and deficits, but only in the medium-term and only if there is a fundamental shift in thinking among G-20 policymakers in favour of the longer-term.