Previous attempts at modelling current observed endogenous financial variables in a macroeconomic model have concentrated on only one observed endogenous variable – namely the short-term rate of interest. The solution method for dealing with more than one observed endogenous variable has thus...

Macro models generally assume away heterogeneous welfare in assessing policies. We investigate here within two aggregative models ó one with a representative agent, the other a long-used forecasting model of the UK ó whether allowing for di§erences in welfare functions (speciÖcally between...

This paper establishes the ability of a Real Business Cycle model to account for real exchange rate behaviour, using UK data. We show that a productivity simulation is capable of explaining initial real appreciation with subsequent depreciation to a lower steady state. The model is tested by the...

The purpose in this letter is first to review briefly the empirical results on the relationship between real interest rates and real exchange rates; this empirical literature provides little support for the hypothesis of Roll that expected real interest rates are equal in general. Our second aim...

This paper offers an alternative rationalization for opportunistic behaviour i.e., a gradual disinflation strategy where policymakers react asymmetrically to supply shocks, opting to disinflate only in recessionary period. Specifically, we show that adaptive expectations combined with asymmetry...

When indexation is endogenous price level targeting slightly adds to economic stability, contrary to widespread fears to the contrary. The aggregate supply curve flattens and the aggregate demand curve steepens, increasing stability in the face of supply shocks.

Monetarism is hard to define because it is not the doctrine of a school that is sharply differentiated from the rival Keynesian and new classical schools. While some ecconomists are clearly monetarists, others take intermediate positions that make it more or less arbitrary whether to call them...