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Fiscal and monetary institutions and policies: onward and upward?

Fiscal and monetary institutions and policies: onward and upward? Purpose – The latest generation of research into macroeconomic policy has turned from more technical aspects of optimal control and expectations formation to consideration of the policymaking institutions themselves. More and more countries have moved towards greater degrees of central bank independence, including many developing economies as well the member countries of the European Central Bank. What still is not generally settled among economists is how to measure the stance of policy and the institutional features of the policymaking process. The purpose of this paper is to assess prevailing monetary and fiscal policies. Design/methodology/approach – The paper takes the form of a review encompassing many different measurements of policy stance and policymaking processes. The authors begin with monetary policy followed by an analysis of central bank institutions. The next sections turn to fiscal policy and the need to adjust budget balance for the state of the business cycle. There is then a brief concluding section. Findings – The authors show in this review that fiscal and monetary rules, and economists' understanding of them, have changed substantially over the years. While on one level there is greater consensus, there have been new questions raised in the process that leave plenty of room for further ongoing research in these key policy areas as well as the optimal design of the design of the monetary and fiscal institutions concerned. Originality/value – The paper provides a review of the existing literature updated and applied with reference to recent events, including the global financial crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economic Policy Emerald Publishing

Fiscal and monetary institutions and policies: onward and upward?

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1757-6385
DOI
10.1108/17576381111182918
Publisher site
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Abstract

Purpose – The latest generation of research into macroeconomic policy has turned from more technical aspects of optimal control and expectations formation to consideration of the policymaking institutions themselves. More and more countries have moved towards greater degrees of central bank independence, including many developing economies as well the member countries of the European Central Bank. What still is not generally settled among economists is how to measure the stance of policy and the institutional features of the policymaking process. The purpose of this paper is to assess prevailing monetary and fiscal policies. Design/methodology/approach – The paper takes the form of a review encompassing many different measurements of policy stance and policymaking processes. The authors begin with monetary policy followed by an analysis of central bank institutions. The next sections turn to fiscal policy and the need to adjust budget balance for the state of the business cycle. There is then a brief concluding section. Findings – The authors show in this review that fiscal and monetary rules, and economists' understanding of them, have changed substantially over the years. While on one level there is greater consensus, there have been new questions raised in the process that leave plenty of room for further ongoing research in these key policy areas as well as the optimal design of the design of the monetary and fiscal institutions concerned. Originality/value – The paper provides a review of the existing literature updated and applied with reference to recent events, including the global financial crisis.

Journal

Journal of Financial Economic Policy – Emerald Publishing

Published: Nov 8, 2011

Keywords: Macroeconomics; Monetary policy; Money supply; Institutions and the macroeconomy; Central Bank policy; Central banking; Credit supply

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