Abstract Should the transmission of monetary policy be understood in terms of its impacts on interest rates and bond yields, or monetary aggregates? This article considers the relationship between those aggregates and inflation, both over the past and more recently. And explains how the MPC takes account of “QT” in its forecasts.
{"title":"MONETARY POLICY: PRICES VERSUS QUANTITIES","authors":"Ben Broadbent","doi":"10.1017/nie.2023.14","DOIUrl":"https://doi.org/10.1017/nie.2023.14","url":null,"abstract":"Abstract Should the transmission of monetary policy be understood in terms of its impacts on interest rates and bond yields, or monetary aggregates? This article considers the relationship between those aggregates and inflation, both over the past and more recently. And explains how the MPC takes account of “QT” in its forecasts.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135740772","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Against the background of the European Commission’s reform plans of the Stability and Growth Pact, this paper uses NiGEM to simulate the macroeconomic implications of re-applying the fiscal rules in 2024. Next to returning to the unreformed rules, the most prominent options include an expenditure rule. Our results indicate that re-applying the unreformed rules leads to severe cuts in public spending. An expenditure rule would, however, not necessarily alleviate the fiscal adjustment burden. Instead, our simulations show that great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way.
{"title":"THE MACROECONOMIC EFFECTS OF RE-APPLYING THE EU FISCAL RULES: RETURNING TO THE STATUS QUO ANTE OR MOVING TO EXPENDITURE RULES?","authors":"Christoph Paetz, Sebastian Watzka","doi":"10.1017/nie.2023.16","DOIUrl":"https://doi.org/10.1017/nie.2023.16","url":null,"abstract":"\u0000 Against the background of the European Commission’s reform plans of the Stability and Growth Pact, this paper uses NiGEM to simulate the macroeconomic implications of re-applying the fiscal rules in 2024. Next to returning to the unreformed rules, the most prominent options include an expenditure rule. Our results indicate that re-applying the unreformed rules leads to severe cuts in public spending. An expenditure rule would, however, not necessarily alleviate the fiscal adjustment burden. Instead, our simulations show that great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":"1 1","pages":""},"PeriodicalIF":2.1,"publicationDate":"2023-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41875088","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This analysis aims at providing an interim assessment of the ECB’s current policy rate tightening cycle. Our analysis suggests that the ECB’s monetary policy measures are tightening financial conditions and reducing credit volumes in the euro area reducing credit volumes. In view of the lags from financing conditions to the real economy, the impact of the policy tightening cycle on inflation can currently be observed only to a limited extent. The scale of the policy tightening required to return inflation to the two percent target over the medium term will need to be regularly reviewed, in view of the uncertainty about the transmission mechanism and in line with the incoming evidence concerning underlying inflation dynamics.
{"title":"THE EURO AREA HIKING CYCLE: AN INTERIM ASSESSMENT: DOW LECTURE BY PHILIP R. LANE, MEMBER OF THE EXECUTIVE BOARD OF THE ECB, AT THE NATIONAL INSTITUTE OF ECONOMIC AND SOCIAL RESEARCH, LONDON, 16 FEBRUARY 2023","authors":"Philip R. Lane","doi":"10.1017/nie.2023.17","DOIUrl":"https://doi.org/10.1017/nie.2023.17","url":null,"abstract":"This analysis aims at providing an interim assessment of the ECB’s current policy rate tightening cycle. Our analysis suggests that the ECB’s monetary policy measures are tightening financial conditions and reducing credit volumes in the euro area reducing credit volumes. In view of the lags from financing conditions to the real economy, the impact of the policy tightening cycle on inflation can currently be observed only to a limited extent. The scale of the policy tightening required to return inflation to the two percent target over the medium term will need to be regularly reviewed, in view of the uncertainty about the transmission mechanism and in line with the incoming evidence concerning underlying inflation dynamics.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":" ","pages":""},"PeriodicalIF":2.1,"publicationDate":"2023-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42665970","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I outline the missing link in macroeconomic analysis of fiscal policy. While the Office for Budget Responsibility’s (OBR) remit does allow it to judge whether the effects of fiscal (or other economic policies) on potential output are material, such judgements will matter little for the horizon over which it is being asked to assess whether the government will meet its fiscal rules. Even if there is a material permanent increase in public investment, for example, as in the 2020 March Budget with a commitment to step from 2% of GDP to 3% of GDP, it takes a quite some time before it cumulates to a sufficient impact on the stock of public capital and on potential output to make a significant difference to the fiscal denominator. But it surely will.
{"title":"THE MISSING LINK: MODELLING POTENTIAL OUTPUT AT THE OFFICE FOR BUDGET RESPONSIBILITY","authors":"Jagjit S. Chadha","doi":"10.1017/nie.2023.13","DOIUrl":"https://doi.org/10.1017/nie.2023.13","url":null,"abstract":"I outline the missing link in macroeconomic analysis of fiscal policy. While the Office for Budget Responsibility’s (OBR) remit does allow it to judge whether the effects of fiscal (or other economic policies) on potential output are material, such judgements will matter little for the horizon over which it is being asked to assess whether the government will meet its fiscal rules. Even if there is a material permanent increase in public investment, for example, as in the 2020 March Budget with a commitment to step from 2% of GDP to 3% of GDP, it takes a quite some time before it cumulates to a sufficient impact on the stock of public capital and on potential output to make a significant difference to the fiscal denominator. But it surely will.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136248811","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Forrest H. Capie, Meyrick Chapman, C. Marsh, G. Wood
This paper weighs possible medium-term responsible policy choices to the extraordinary expansion of government spending in response to the COVID-19 outbreak. The paper is divided into two parts. In part 1 of the paper, we look at conventional debt sustainability and question whether conventional rules created during a period of high interest rates and high inflation remain relevant. Current and future conditions support a case for government debt/GDP to remain elevated compared to history, conditional upon limited state interference in the economy to allow appropriate allocation of capital and resources. In part 2, we consider the historical experience of the United Kingdom. History shows the country had several examples of rapid, large-scale expansion of government debt relative to the size of the economy. On each occasion, the elevated level of debt-to-GDP was later reduced by a combination of relatively benign factors, including commitment to low inflation and sound monetary system. This supported the financial probity of the UK government and allowed it to continue to borrow unimpeded.
{"title":"ANOTHER LOOK AT A SENSIBLE FISCAL POLICY FOR THE SHARP RISE IN GOVERNMENT DEBT","authors":"Forrest H. Capie, Meyrick Chapman, C. Marsh, G. Wood","doi":"10.1017/nie.2023.15","DOIUrl":"https://doi.org/10.1017/nie.2023.15","url":null,"abstract":"\u0000 This paper weighs possible medium-term responsible policy choices to the extraordinary expansion of government spending in response to the COVID-19 outbreak. The paper is divided into two parts. In part 1 of the paper, we look at conventional debt sustainability and question whether conventional rules created during a period of high interest rates and high inflation remain relevant. Current and future conditions support a case for government debt/GDP to remain elevated compared to history, conditional upon limited state interference in the economy to allow appropriate allocation of capital and resources. In part 2, we consider the historical experience of the United Kingdom. History shows the country had several examples of rapid, large-scale expansion of government debt relative to the size of the economy. On each occasion, the elevated level of debt-to-GDP was later reduced by a combination of relatively benign factors, including commitment to low inflation and sound monetary system. This supported the financial probity of the UK government and allowed it to continue to borrow unimpeded.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":" ","pages":""},"PeriodicalIF":2.1,"publicationDate":"2023-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42176699","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Emissions are directly linked to economic output and consequently subject to business cycle fluctuations. The present study analyses the interactions between climate policies and business cycles through the lens of a New Keynesian dynamic stochastic general equilibrium model. We compare a static cap-and-trade policy with a dynamically adjusting policy in terms of macroeconomic stabilisation, welfare and emissions price dynamics. The results of the quantitative evaluation suggest that a constant policy leads to lower aggregate volatility but is associated with larger welfare costs. In contrast, under the dynamic policy emissions prices and labour markets display less variations.
{"title":"CLIMATE POLICIES AND BUSINESS CYCLES: THE EFFECTS OF A DYNAMIC CAP","authors":"Ulrich Eydam","doi":"10.1017/nie.2023.12","DOIUrl":"https://doi.org/10.1017/nie.2023.12","url":null,"abstract":"\u0000 Emissions are directly linked to economic output and consequently subject to business cycle fluctuations. The present study analyses the interactions between climate policies and business cycles through the lens of a New Keynesian dynamic stochastic general equilibrium model. We compare a static cap-and-trade policy with a dynamically adjusting policy in terms of macroeconomic stabilisation, welfare and emissions price dynamics. The results of the quantitative evaluation suggest that a constant policy leads to lower aggregate volatility but is associated with larger welfare costs. In contrast, under the dynamic policy emissions prices and labour markets display less variations.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":" ","pages":""},"PeriodicalIF":2.1,"publicationDate":"2023-06-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47445640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Not so very long ago, I argued that it was possible to characterise modern monetary and fiscal policy in the UK as a function of three key events: exit from the European Exchange Rate Mechanism in September 1992, the election of ‘New Labour’ in May 1997 and the global financial crisis of 2007–2009. The first led to the adoption of a domestic inflation target in October 1992, the second to the operational independence of the Bank of England and the establishment of the Monetary Policy Committee and the third to the acceptance of the need for macro-prudential policies, extraordinary monetary interventions to augment a simple interest rate rule and formal budgetary oversight by a fiscal council. The latter was provided by the Office for Budget Responsibility, which was established in 2010.
{"title":"MONETARY AND FISCAL POLICY REDUX—THE MINI-BUDGET","authors":"J. Chadha","doi":"10.1017/nie.2023.8","DOIUrl":"https://doi.org/10.1017/nie.2023.8","url":null,"abstract":"Not so very long ago, I argued that it was possible to characterise modern monetary and fiscal policy in the UK as a function of three key events: exit from the European Exchange Rate Mechanism in September 1992, the election of ‘New Labour’ in May 1997 and the global financial crisis of 2007–2009. The first led to the adoption of a domestic inflation target in October 1992, the second to the operational independence of the Bank of England and the establishment of the Monetary Policy Committee and the third to the acceptance of the need for macro-prudential policies, extraordinary monetary interventions to augment a simple interest rate rule and formal budgetary oversight by a fiscal council. The latter was provided by the Office for Budget Responsibility, which was established in 2010.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":"262 1","pages":"1 - 7"},"PeriodicalIF":2.1,"publicationDate":"2023-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43410669","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sheilagh Ogilvie doi: 10.1017/nie.2022.42, Published by Cambridge University Press, 21 February 2023. The article contains incorrect citation information: Henriques, A., Freire Costa, L. and Palma, N. (2022), ‘Anatomy of a premodern state’, Economics Discussion Paper Series, EDP-2208, University of Manchester. The correct reference for this paper is as follows: Costa, L. F., Henriques, A. and Palma, N. (2022). ‘Anatomy of a Premodern State’, Economics Discussion Paper Series, EDP-2208, University of Manchester.
Sheilagh Ogilvie doi: 10.1017/ niee .2022.42，剑桥大学出版社，2023年2月21日出版。该文章包含不正确的引用信息:Henriques, A.， Freire Costa, L.和Palma, N.(2022)，“剖析一个前现代国家”，经济学讨论论文系列，EDP-2208，曼彻斯特大学。本文的正确参考文献如下:Costa, L. F, Henriques, A. and Palma, N.(2022)。“前现代国家的解剖”，经济学讨论论文系列，EDP-2208，曼彻斯特大学。
{"title":"STATE CAPACITY AND ECONOMIC GROWTH: CAUTIONARY TALES FROM HISTORY – CORRIGENDUM","authors":"Sheilagh Ogilvie","doi":"10.1017/nie.2023.11","DOIUrl":"https://doi.org/10.1017/nie.2023.11","url":null,"abstract":"Sheilagh Ogilvie doi: 10.1017/nie.2022.42, Published by Cambridge University Press, 21 February 2023. The article contains incorrect citation information: Henriques, A., Freire Costa, L. and Palma, N. (2022), ‘Anatomy of a premodern state’, Economics Discussion Paper Series, EDP-2208, University of Manchester. The correct reference for this paper is as follows: Costa, L. F., Henriques, A. and Palma, N. (2022). ‘Anatomy of a Premodern State’, Economics Discussion Paper Series, EDP-2208, University of Manchester.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":" ","pages":""},"PeriodicalIF":2.1,"publicationDate":"2023-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48042172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article is a response to a piece in this journal, by David Bartram, which questions the validity of a vast literature establishing consistently a U-shaped relationship between age and happiness. There are 618 published studies that find U-shapes in that relationship in 145 countries, and only a handful that do not. Of the 30 countries that Bartram (2023, National Institute Economic Review, 1–15) examines, he finds U-shapes in 18. We show compelling evidence of U-shapes in the remaining dozen countries. Supporting evidence of a U-shape is found in objective measures including deaths of despair, depression, stress and pain that are worst in midlife.
{"title":"HAPPINESS AND AGE—RESOLVING THE DEBATE","authors":"David G. Blanchflower, C. Graham, Alan T. Piper","doi":"10.1017/nie.2023.1","DOIUrl":"https://doi.org/10.1017/nie.2023.1","url":null,"abstract":"\u0000 This article is a response to a piece in this journal, by David Bartram, which questions the validity of a vast literature establishing consistently a U-shaped relationship between age and happiness. There are 618 published studies that find U-shapes in that relationship in 145 countries, and only a handful that do not. Of the 30 countries that Bartram (2023, National Institute Economic Review, 1–15) examines, he finds U-shapes in 18. We show compelling evidence of U-shapes in the remaining dozen countries. Supporting evidence of a U-shape is found in objective measures including deaths of despair, depression, stress and pain that are worst in midlife.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":" ","pages":""},"PeriodicalIF":2.1,"publicationDate":"2023-04-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43021750","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Over 50 years ago, New Society first identified a new ‘Oxford School’ considered central to British post-war reconstruction. Based around Nuffield College, it contained five key figures: Hugh Clegg, Allan Flanders, Alan Fox, Bill McCarthy and Arthur Marsh. Other identified contributors were Ben Roberts, John Hughes and legal theorist Otto Kahn-Freund. A second generation included the likes of George Bain, Willy Brown, Richard Hyman, Rod Martin and Roger Undy. Intriguingly, as early as the late 1940s its key theorist Flanders described their social democratic approach to build industrial pluralism as the ‘third way’—obviously a phrase given greater prominence in the 1990s by Tony Blair and Tony Giddens.
{"title":"LABOUR REGULATION AND PRODUCTIVITY IN THE UK SINCE 1945: DEBUNKING MYTHS ABOUT ‘DISEASE’, ‘MIRACLES’ AND ‘PUZZLES’","authors":"Jon Cruddas","doi":"10.1017/nie.2022.40","DOIUrl":"https://doi.org/10.1017/nie.2022.40","url":null,"abstract":"Over 50 years ago, New Society first identified a new ‘Oxford School’ considered central to British post-war reconstruction. Based around Nuffield College, it contained five key figures: Hugh Clegg, Allan Flanders, Alan Fox, Bill McCarthy and Arthur Marsh. Other identified contributors were Ben Roberts, John Hughes and legal theorist Otto Kahn-Freund. A second generation included the likes of George Bain, Willy Brown, Richard Hyman, Rod Martin and Roger Undy. Intriguingly, as early as the late 1940s its key theorist Flanders described their social democratic approach to build industrial pluralism as the ‘third way’—obviously a phrase given greater prominence in the 1990s by Tony Blair and Tony Giddens.","PeriodicalId":45594,"journal":{"name":"National Institute Economic Review","volume":"262 1","pages":"13 - 21"},"PeriodicalIF":2.1,"publicationDate":"2023-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44269720","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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