Macroeconomic policy

Enhancing the transparency of the Bank of England’s Inflation Report

Jack McKeown, Lea Paterson, 18 July 2014

The Bank of England has introduced a series of changes aimed at enhancing the transparency of its flagship communication vehicle for monetary policy – the Inflation Report. This column by two BoE economists sets the rationale for these changes in the context of the economic literature.

Making macroprudential regulation operational

Anil K Kashyap , Dimitri Tsomocos, Alexandros Vardoulakis, 18 July 2014

Do the extant workhorse models used in policy analysis support macroprudential and macrofinancial policies? This column argues that this is not the case and describes a new macroprudential model that stresses the special role played by banks. The model also accounts for two, often neglected, key principles of the financial systems. Some of the findings of the model could carry over to other, more general settings that satisfy these two principles.

The failed policy response to the Global Crisis

Richard Wood, 13 July 2014

The Global Crisis triggered a series of medium-term policy changes. This column reviews the effectiveness of some of these monetary, fiscal policies, and internal devaluation policies. Policymakers anchored their strategic thinking in paradigms that became inapplicable to the new problems. An alternative set of macroeconomic policies is suggested.

Macroprudential policy: A survey of UK-based macroeconomists

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 8 July 2014

How should UK policy-makers respond to potential dangers to the economy from the housing market? As this column reports, a majority of respondents to the fourth monthly survey of the Centre for Macroeconomics (CFM) think that house price dynamics do pose a risk to the UK’s recovery; and that macroprudential tools rather than traditional interest rate policy should be deployed to deal with this risk.

Revisiting the pain in Spain

Paul De Grauwe, 7 July 2014

There has been a stark contrast between the experiences of Spain and the UK since the Global Crisis. This column argues that although the ECB’s Outright Monetary Transactions policy has been instrumental in reducing Spanish government bond yields, it has not made the Spanish fiscal position sustainable. Although the UK has implemented less austerity than Spain since the start of the crisis, a large currency depreciation has helped to reduce its debt-to-GDP ratio

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