This paper begins by arguing that the 2007-8 credit crunch does not require a fundamental re-evaluation of monetary policy. The crunch occurred because regulation was too lax, and we need to develop new and more effective tools of regulatory control. To focus on current account imbalances or...

The paper estimates underlying labour-productivity growth for each of the G7 countries over the last two decades. Underlying productivity is proxied by a stochastic trend, which is estimated using the Kalman filter. This technique allows the data to determine when changes in growth have occurred...

This paper offers a critique of the UK government's Medium Term Financial Strategy from a policy optimization perspective. It argues that recent versions of the MTFS can be interpreted as representing the outcome of a policy optimization exercise, but that certain key aspects remain unclear....

In this paper we present two examples where the presence of inflation persistence could influence the qualitative nature of monetary policy. In the first case the desirability of a monetary policy regime comes under question when extensive inflation persistence exists. In the second case the...

We generalise the analysis of inflation bias with dynamic Phillips curves in three respects. First, we examine the discretionary (time consistent) solution in cases where the Phillips curve has both a backward looking and forward-looking component. Second, we show that the commitment (time...

We analyse the stability of countries within a monetary union in the face of asymmetric shocks, using a simple but widely applicable model. We show that members of the union may be subject to severe, and possibly unstable, cycles following asymmetric shocks if there is a significant backward...

This paper evaluates the extended target zone proposal of Williamson and Miller using the National Institute world economic model (GEM). Williamson and Miller's proposals envisage that real exchange rates will be controlled by movements in relative interest rates, that fiscal policy will be used...

The Fundamental Equilibrium Exchange Rate (FEER) is the real exchange rate which produces a current account that is exactly matched by equilibrium medium-term capital flows. This paper sets out a small model to calculate FEERs for the G7 from 1971 to 1988. This model's parameters are either...