In EMU, a country may have difficulty ensuring stability in the face of asymmetric shocks; the response may be unstable, or, even if not, the real exchange rate might overshoot. Fiscal policy may help to stabilise inflation and also to target the real exchange rate. The paper argues that an...

The United Kingdom's monetary policy strategy is one of floating exchange rates and inflation forecast targeting, with the targeted measure referring to consumer prices. We consider whether it is welfare-reducing to target inflation in the CPI rather than in a narrower index; and the role of the...

This article examines the new consensus that fiscal policy should have no macroeconomic role in `flexible inflation targeting` regimes. There is little basis for this presumption. Fiscal policy remains important in setting the policy mix and in managing shocks and imbalances. The credibility of...