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Conference Paper
The domestic and global impact of Japan’s policies for growth
This paper illustrates the possible impact of fiscal adjustment and productivity-enhancing structural reforms on the Japanese and world economies. More specifically, using a five-bloc version of the IMF's Global Economy Model (GEM) featuring Japan, emerging Asia, the United States, the euro area and the rest of the world, the paper addresses the following two questions: What is the likely adjustment of key macroeconomic variables as Japan moves toward external equilibrium under alternative fiscal consolidation and total factor productivity growth scenarios? Do alternative policy scenarios in ...
Working Paper
The U.K.'s rocky road to stability
This paper provides an overview, using extensive documentary material, of developments in U.K. macroeconomic policy in the last half-century. Rather than focusing on well-known recent changes in policy arrangements (such as the introduction of inflation targeting in 1992 or central bank independence in 1997), we instead take a longer perspective, which characterizes the favorable economic performance in the 1990s and 2000s as the culmination of an overhaul of macroeconomic policy since the late 1970s. We stress that policymaking in recent decades has discarded various misconceptions about the ...
Conference Paper
Monetary policy rules for an open economy
The most popular simple rule for the interest rate, due to Taylor (1993a) is meant to inform monetary policy in economies that are closed. On the other hand, its main open economy alternative, i.e. Ball's (1999) rule based on a Monetary Conditions Index (MCI), may perform poorly in the face of specific types of exchange rate shocks and thus cannot offer guidance for the day-to-day conduct of monetary policy. In this paper we specify and evaluate a comprehensive set of simple monetary policy rules that are suitable for small open economies in general, and for the United Kingdom in particular. ...
Working Paper
Indeterminacy with inflation-forecast-based rules in a two-bloc model
We examine the performance of forward-looking inflation-forecast-based rules in open economies. In a New Keynesian two-bloc model, a methodology first employed by Batini and Pearlman (2002) is used to obtain analytically the feedback parameters/horizon pairs associated with unique and stable equilibria. Three key findings emerge: First, indeterminacy occurs for any value of the feedback parameter on inflation if the forecast horizon lies too far into the future. Second, the problem of indeterminacy is intrinsically more serious in the open economy. Third, the problem is compounded further in ...