Globalisation and macroeconomic stability in the New Economy

This chapter addresses the implications of the current stage of globalization for macroeconomic stability, taken in a very broad sense as encompassing both cyclical and growth issues. In doing so, I hope to shed light on some methodological issues, such as the conditions which make stability analysis possible. Globalization is best seen not as an isolated phenomenon, but as a key feature of the New Economy (NE). One of the main characteristics of the NE is the rapid spread of the new information technologies, such as the Internet. Another is the increasing significance of intangibles and financial markets. While globalization is a relatively long-standing phenomenon, the NE in some way implies its acceleration. A balanced assessment of the new globalization is lacking in the literature, where the issues are often presented in an ideological light. This has resulted in the proliferation of rather simplistic views, such as those espousing total rejection on the one hand, or passive acceptance on the other. To remedy this state of affairs, here I outline a number of steps that can be taken to achieve a more balanced view. In particular, I stress that globalization should be seen as a two-edged sword that tends to create both opportunities and threats, winners and losers.