bain_y_howells__monetary_economics__policy_and_its_theoretical_basis

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5. Explain how the rational expectations hypothesis has been used (a) to support the adoption of monetary rules and (b) to criticise the feasibility of forecasting. 6. Explain the problems associated with the choice of the money supply as an intermediate target. 7. What are the arguments for basing an inflation target on (a) RPIX and (b) RPIY? 8. Compare and contrast the merits of inflation and nominal income as monetary policy targets. 9. Why does the ability of the MPC of the Bank of England to set its own policy horizon give it some goal independence? 10. Explain the view that inflation targeting in practice means the targeting of the central bank’s inflation forecast rather than the rate of inflation itself. 11. Why do you think central banks have not adopted an instrument setting rule of the Taylor type? Further reading THE THEORY OF MONETARY POLICY 273 The best recent coverage of theories of macroeconomic policy is in Acocella (1998). Amongst older books, M Peston (1982) is very helpful. Acocella also discusses the goals of macroeconomic policy at some length. A collection of essays which discusses most of the issues raised in inflation targeting is in Haldane (1995b). Amongst them, Bowen explains the thinking behind inflation targets in the UK while Yates discusses issues involved in designing inflation targets. Useful on UK experience also is Haldane (1995a) in the Bank of England Quarterly Bulletin. A more recent discussion of targets and rules for the conduct of policy is Cecchetti et al (2000) while Gerlach and Schnabel (2000) show that the setting of interest rates in the EMU has in practice approximated what would have followed from a Taylor rule. A broader survey of monetary policy rules is provided by Taylor (1999b).
274 MONETARY ECONOMICS For an elaboration of the idea that inflation targeting amounts in practice to the targeting of central bank inflation forecasts see Svensson (1999). Two essential articles for any study of the conduct of monetary policy are provided bu Goodhart in the Economic Journal (1989b and 1994).
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Monetary Economics: Policy and its
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© Keith Bain and Peter G A Howells
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vi CONTENTS 5 The Theory of the Dem
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viii CONTENTS 12 The Monetary Autho
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x LIST OF BOXES, FIGURES AND TABLES
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xii PREFACE metrics. There are equa
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2 MONETARY ECONOMICS Despite this,
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4 MONETARY ECONOMICS tification of
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6 MONETARY ECONOMICS the meaning of
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8 MONETARY ECONOMICS as a unit of a
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10 MONETARY ECONOMICS The only reas
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12 MONETARY ECONOMICS demand for lo
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14 MONETARY ECONOMICS assume that t
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16 MONETARY ECONOMICS in the book.
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18 MONETARY ECONOMICS ducing only f
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20 MONETARY ECONOMICS involved in t
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22 MONETARY ECONOMICS etary economi
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24 MONETARY ECONOMICS acceptable in
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26 MONETARY ECONOMICS also told in
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28 MONETARY ECONOMICS simplified vi
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30 MONETARY ECONOMICS The substitut
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32 MONETARY ECONOMICS hold them and
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34 MONETARY ECONOMICS sufficiently
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36 MONETARY ECONOMICS asset that wo
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38 MONETARY ECONOMICS Prescriptive
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40 MONETARY ECONOMICS book with a f
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42 MONETARY ECONOMICS Table 2.1: UK
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44 MONETARY ECONOMICS ized by the M
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46 MONETARY ECONOMICS ter are frequ
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48 MONETARY ECONOMICS ent definitio
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Box 3.1: Official measures of money
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52 MONETARY ECONOMICS identities. T
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54 MONETARY ECONOMICS ply and (iii)
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56 MONETARY ECONOMICS tiple of the
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58 MONETARY ECONOMICS of money to b
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60 MONETARY ECONOMICS The two examp
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62 MONETARY ECONOMICS than the deno
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64 MONETARY ECONOMICS nous money re
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66 MONETARY ECONOMICS and then subs
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68 MONETARY ECONOMICS making it dep
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70 MONETARY ECONOMICS sional appear
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72 MONETARY ECONOMICS Further readi
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74 MONETARY ECONOMICS system (and a
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76 MONETARY ECONOMICS reserves are
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78 MONETARY ECONOMICS Exercise 4.1:
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80 MONETARY ECONOMICS notes, prices
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82 MONETARY ECONOMICS doubted the B
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84 MONETARY ECONOMICS Box 4.2: The
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86 MONETARY ECONOMICS threat of ins
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88 MONETARY ECONOMICS adjusting to
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90 MONETARY ECONOMICS icy which tar
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92 MONETARY ECONOMICS pendently of
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94 MONETARY ECONOMICS 5. Explain wh
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96 MONETARY ECONOMICS Section 4.4 t
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98 MONETARY ECONOMICS money plays i
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100 MONETARY ECONOMICS Box 5.1 cont
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102 MONETARY ECONOMICS the demand f
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104 MONETARY ECONOMICS determinatio
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106 MONETARY ECONOMICS In The Gener
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108 MONETARY ECONOMICS Figure 5.2:
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110 MONETARY ECONOMICS Keynes’s a
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112 MONETARY ECONOMICS cause bond p
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114 MONETARY ECONOMICS needed to pu
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116 MONETARY ECONOMICS This conside
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118 MONETARY ECONOMICS limits himse
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120 MONETARY ECONOMICS To investiga
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122 MONETARY ECONOMICS The theory c
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124 MONETARY ECONOMICS in the above
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126 MONETARY ECONOMICS 5.9 Microeco
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128 MONETARY ECONOMICS 5.11 Summary
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130 MONETARY ECONOMICS 4. How is th
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132 MONETARY ECONOMICS explaining t
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134 MONETARY ECONOMICS (a) There is
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136 MONETARY ECONOMICS However, Fig
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138 MONETARY ECONOMICS required by
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140 MONETARY ECONOMICS when the rat
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142 MONETARY ECONOMICS Suppose, how
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144 MONETARY ECONOMICS demands for
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146 MONETARY ECONOMICS money, with
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148 MONETARY ECONOMICS rather than
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150 MONETARY ECONOMICS Such combina
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152 MONETARY ECONOMICS (i) Financia
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154 MONETARY ECONOMICS they do. Ins
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156 MONETARY ECONOMICS Many attempt
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158 MONETARY ECONOMICS Pause for th
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160 MONETARY ECONOMICS level (they
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162 MONETARY ECONOMICS 6.5 Sceptica
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164 MONETARY ECONOMICS interest rat
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166 MONETARY ECONOMICS ment of hous
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168 MONETARY ECONOMICS have been of
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170 MONETARY ECONOMICS 7. Explain e
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172 MONETARY ECONOMICS • a change
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174 MONETARY ECONOMICS central bank
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176 MONETARY ECONOMICS As with hous
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178 MONETARY ECONOMICS • the rela
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180 MONETARY ECONOMICS 7.4 The tran
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182 MONETARY ECONOMICS However, if
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184 MONETARY ECONOMICS the supply o
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186 MONETARY ECONOMICS Tobin's port
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188 MONETARY ECONOMICS powerful and
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190 MONETARY ECONOMICS On the other
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192 MONETARY ECONOMICS In addition,
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194 MONETARY ECONOMICS desired stoc
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196 MONETARY ECONOMICS demand for l
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198 MONETARY ECONOMICS est rate are
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200 MONETARY ECONOMICS icy as in Fi
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202 MONETARY ECONOMICS the new stoc
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204 MONETARY ECONOMICS cause the co
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206 MONETARY ECONOMICS 5. The text
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208 MONETARY ECONOMICS mission mech
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210 MONETARY ECONOMICS Phillips (19
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212 MONETARY ECONOMICS reflect this
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214 MONETARY ECONOMICS non-accelera
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216 MONETARY ECONOMICS money supply
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218 MONETARY ECONOMICS output all r
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220 MONETARY ECONOMICS However, the
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324 MONETARY ECONOMICS relativities
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326 MONETARY ECONOMICS term interes
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328 MONETARY ECONOMICS 11.3 Financi
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330 MONETARY ECONOMICS 3.1). If its
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332 MONETARY ECONOMICS evasion. Suc
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334 MONETARY ECONOMICS ing the capi
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336 MONETARY ECONOMICS a bank’s a
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338 MONETARY ECONOMICS the main rat
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340 MONETARY ECONOMICS own rate adj
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342 MONETARY ECONOMICS 1988 this wa
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344 MONETARY ECONOMICS it inflation
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346 MONETARY ECONOMICS Services Aut
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348 MONETARY ECONOMICS Table 11.2:
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350 MONETARY ECONOMICS Key concepts
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352 MONETARY ECONOMICS implications
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354 MONETARY ECONOMICS central bank
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356 MONETARY ECONOMICS Exercise 12.
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358 MONETARY ECONOMICS dom from pol
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360 MONETARY ECONOMICS ground infor
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362 MONETARY ECONOMICS vide liquidi
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364 MONETARY ECONOMICS 2001 p.438).
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366 MONETARY ECONOMICS Methods for
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368 MONETARY ECONOMICS cial, to inv
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370 MONETARY ECONOMICS ibility then
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372 MONETARY ECONOMICS in official
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374 MONETARY ECONOMICS 7. You obser
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376 MONETARY ECONOMICS 13.2 The mem
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378 MONETARY ECONOMICS The conditio
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380 MONETARY ECONOMICS of whether i
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382 MONETARY ECONOMICS The question
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384 MONETARY ECONOMICS other member
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386 MONETARY ECONOMICS they would b
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388 MONETARY ECONOMICS really is a
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390 MONETARY ECONOMICS Article 105(
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392 MONETARY ECONOMICS must apply t
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394 MONETARY ECONOMICS The first is
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396 MONETARY ECONOMICS 13.5 The for
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398 MONETARY ECONOMICS as much atte
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400 MONETARY ECONOMICS The change t
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402 MONETARY ECONOMICS Table 13.2:
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404 MONETARY ECONOMICS about the po
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406 MONETARY ECONOMICS ECB appeared
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408 MONETARY ECONOMICS the November
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410 MONETARY ECONOMICS Thus, some e
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412 MONETARY ECONOMICS claims by th
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414 MONETARY ECONOMICS posed in the
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416 MONETARY ECONOMICS 8. In the te
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418 MONETARY ECONOMICS England, the
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420 MONETARY ECONOMICS Treasury sec
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422 MONETARY ECONOMICS Box 14.1: Th
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424 MONETARY ECONOMICS Box 14.2: Th
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426 MONETARY ECONOMICS clearances.
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428 MONETARY ECONOMICS and tends to
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430 MONETARY ECONOMICS because bank
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432 MONETARY ECONOMICS value of fin
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434 MONETARY ECONOMICS members of C
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436 MONETARY ECONOMICS Russia and L
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438 MONETARY ECONOMICS In his expla
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440 MONETARY ECONOMICS been rushed
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442 MONETARY ECONOMICS Key concepts
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Appendix 1: The IS/LM model Althoug
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APPENDIX - I 447 causes the curve t
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i i 1 i 0 M T O O 1 MT 0 MT O Figur
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A taxonomy of LM impacts APPENDIX -
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ment along the LM curve, while a ch
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Financial innovation and the money
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APPENDIX - I 457 where i represents
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Appendix II: The Term Structure of
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investor who wishes to invest for t
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don the expectations theory and thi
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public sector as are deposits at th
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7. For details of theoretical exten
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3. In dynamic optimal control model
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6. e.g. in Zawadzki (1981), Gowland
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cent reserve requirement for the fi
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Artis M J and Lewis M K (1991) Mone
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REFERENCES 477 Bean C R and Jenkins
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REFERENCES 479 Burns A F and Mitche
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REFERENCES 481 Cramer J S (1986)
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Quarterly Review, 84 (3), 30-51 REF
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REFERENCES 485 Fratianni M and von
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REFERENCES 487 their macroeconomic
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Heffernan S A (1997) ‘Modelling B
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REFERENCES 491 (eds) (1973) Collect
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REFERENCES 493 Lee T H (1967) ‘Al
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REFERENCES 495 Monetary System: a s
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Muscatelli V A, Tirelli P and Trecr
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Shackle G L S (1971), Discussion Pa
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Tobin J (1956) ‘The interest-elas
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Index Acocella N 224 Adam C 138, 15
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frown costs 427 Galbraith J K 3, 22
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money - continued meaning of word 2
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Weller P 362, 363 West K 267 Whitle
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