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Money, Inflation and Employment examines issues of economic policy
and theory through a series of original essays written in
recognition of Sir James Ball's seminal contribution to
macroeconomic modelling, forecasting and economic policy
making.Contributions by leading policymakers focus primarily on the
UK economy, with papers by Jeremy Bray, MP, on managing the
economy, Alan Budd, Chief Economic Adviser to the Treasury, on
exchange rate policy, Sir Terence Burns, Permanent Secretary to the
Treasury, on the Treasury's responsibilities and character, and
Bill Robinson on the effects of North Sea oil. Later contributions
address technical questions, with papers by David Currie and Steven
Hall on expectations and learning, D.F. Hendry and M.P. Clements on
a theory of intercept corrections in macroeconomic forecasting,
Lawrence Klein on economic forecasting and decision making under
uncertainty, Ken Wallis and Keith Church on price homogeneity and
the supply side in a number of models of the UK economy.
Many of the assumptions that underpin mainstream macroeconomic
models have been challenged as a result of the traumatic events of
the recent financial crisis. Thus, until recently, it was widely
agreed that although the stock of money had a role to play, in
practice it could be ignored as long as we used short-term nominal
interest rates as the instrument of policy because money and other
credit markets would clear at the given policy rate. However, very
early on in the financial crisis interest rates effectively hit
zero percent and so central banks had to resort to a wholly new set
of largely untested instruments to restore order, including
quantitative easing and the purchase of toxic financial assets.
This book brings together contributions from economists working in
academia, financial markets and central banks to assess the
effectiveness of these policy instruments and explore what lessons
have so far been learned.
The rational expectations revolution and other developments in
economics (notably game theory) have fundamentally altered the
application of optimal control theory to economic forecasting and
planning. In particular, they have shown that economic systems
cannot be modelled simplistically on physical systems. However, as
the authors of this volume show, these developments have greatly
enhanced our understanding of how an economy functions, and now
make it possible for optimal control theory to be applied much more
effectively to economic modelling and planning. This book is
divided into two parts. The first presents the orthodox framework
but extends it to allow for multiplicative uncertainty, risk and
non-linearities in the econometric model. The second part looks
explicitly at the question of expectations. It provides methods by
which forward-looking expectations can be treated jointly with the
determination of economic policy. It also examines game-theoretic
considerations - where, for instance, policy makers may have
incentive to renege on their commitments.
The rational expectations revolution and other developments in
economics (notably game theory) have fundamentally altered the
application of optimal control theory to economic forecasting and
planning. In particular, they have shown that economic systems
cannot be modelled simplistically on physical systems. However, as
the authors of this volume show, these developments have greatly
enhanced our understanding of how an economy functions, and now
make it possible for optimal control theory to be applied much more
effectively to economic modelling and planning. This book is
divided into two parts. The first presents the orthodox framework
but extends it to allow for multiplicative uncertainty, risk and
non-linearities in the econometric model. The second part looks
explicitly at the question of expectations. It provides methods by
which forward-looking expectations can be treated jointly with the
determination of economic policy. It also examines game-theoretic
considerations - where, for instance, policy makers may have
incentive to renege on their commitments.
Many of the assumptions that underpin mainstream macroeconomic
models have been challenged as a result of the traumatic events of
the recent financial crisis. Thus, until recently, it was widely
agreed that although the stock of money had a role to play, in
practice it could be ignored as long as we used short-term nominal
interest rates as the instrument of policy because money and other
credit markets would clear at the given policy rate. However, very
early on in the financial crisis interest rates effectively hit
zero percent and so central banks had to resort to a wholly new set
of largely untested instruments to restore order, including
quantitative easing and the purchase of toxic financial assets.
This book brings together contributions from economists working in
academia, financial markets and central banks to assess the
effectiveness of these policy instruments and explore what lessons
have so far been learned.
Macroeconomic modeling has been one of the most important and influential areas of economic research. This book presents contributions from the leading researchers working in this area as part of the ongoing research project sponsored by the Economic and Social Research Council, Bank of England and UK Treasury. The papers combine a description of the latest techniques used in modeling the economy with an account of the way that models can be used for purposes of policy analysis. It is designed for use by advanced students and professional economists.
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