Central bankers and many economists have abandoned activist policies and monetarism and adopted in their place a new view of the role of monetary policy. This view draws on many of the tenets of more traditional theories of money - monetarism's emphasis on inflation control and skepticism about...

This brief provides a detailed description of the Stability and Growth Pact, an agreement entered into by the member states of the European Union that has far-reaching implications for the long-run value of the euro, and therefore, on the real economy in terms of output growth and employment....

In this paper we advocate a way of approaching macroeconomic policy, which stands in contrast to the now discredited 'new consensus in macroeconomics' policy framework. The five pillars of our approach are: the need for budget deficits to support the level of aggregate demand; full consideration...

The Bank of England's report on its approach to macroeconomic modeling reveals the underlying structure of their macroeconomic model used for policy purposes. A simplified representation of the Bank of England model is presented, which is less disaggregated than the original model and focuses on...

This paper is concerned with the New Consensus Macroeconomics (NCM) in the case of an open economy. It outlines and explains briefly the main elements of and way of thinking about the macroeconomy from the standpoint of both its theoretical and its policy dimensions. There are a few problems...

Practical monetary policy concerns and recent theoretical developments have revived interest in the concept of a "natural" equilibrium real interest rate. The natural real interest rate is potentially an important concept for monetary policy makers and some researchers have suggested that the...

We consider an (otherwise standard) New Neoclassical Synthesis theoretical framework that allows a role for money. Money in our model has an informational role which consists in facilitating the estimation of the unobserved shocks that drive potential output and thus the state of the economy....

There has been a major shift within macroeconomic policy over the past two decades or so in terms of the relative importance given to monetary policy and to fiscal policy in both policy and theoretical terms. The former has gained considerably in importance, with the latter being rarely...

Current monetary policy involves the manipulation of the Central Bank interest rate (the repo rate), with the specific objective of achieving the goal(s) of monetary policy. The latter is normally the inflation rate, although in a number of instances this may include the level of economic...