Chapter 23 Economic interdependence and coordination of economic policies The term “economic interdependence” has come into widespread use during the past decade. The chapter addresses the various meanings of this term the possible reasons for increased economic interdependence on some of its meanings and the implications of that increased economic interdependence for the functioning of national economies including national economic policy. Economic interdependence refers to some measure of the value of economic transactions between two countries or between a country and the rest of the world perhaps scaled to total national output or to some measure of total financial assets. The responses to increased economic interdependence have varied in character and direction. One response involves steps toward disintegration to reduce the interdependence and restore some freedom of action to national policy makers. A second response involves attempts to coordinate national policy actions in one fashion or another sometimes through conscious collaboration among nations sometimes by one nation attempting to impose its preferred course of action on others. A third response involves the search for new policy instruments not subject to the same degree of erosion as the traditional instruments or even choosing instruments that capitalize on the increased economic openness and mobility. New barriers to foreign trade and international movement of capital are examples of disintegration of efforts to reduce interdependence by providing for increased separation among national markets.