Hardback

The New Monetary Policy

Implications and Relevance

9781843769545 Edward Elgar Publishing

Edited by Philip Arestis, University Director of Research, Cambridge Centre for Economic and Public Policy, Department of Land Economy, University of Cambridge and Fellow, Wolfson College, UK, Michelle Baddeley, University of Technology Sydney, Australia and John S.L. McCombie, Professor of Regional and Applied Economics and Director, Cambridge Centre for Economic and Public Policy, Department of Land Economy, University of Cambridge and Fellow of Downing College, Cambridge, UK

Publication Date: January 2006 ISBN: 978 1 84376 954 5 Extent: 264 pp

Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book suggests that many countries have adopted the New Consensus Monetary Policy since the early 1990s in an attempt to reduce inflation to low levels. It goes on to illustrate that the explicit control of the money supply, which was fashionable in the 1970s and 1980s in the UK, US, Europe and elsewhere, was abandoned in favour of monetary rules that focus on interest rate manipulation by the central bank. The objective of these rules is to achieve specific, or a range of, inflation targets.

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Recent developments in macroeconomic and monetary thinking have given a new impetus to the management of the economy. The use of monetary policy by way of manipulating the rate of interest to affect inflation is now well accepted by both academic economists and central bank practitioners. Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book suggests that many countries have adopted the New Consensus Monetary Policy since the early 1990s in an attempt to reduce inflation to low levels. It goes on to illustrate that the explicit control of the money supply, which was fashionable in the 1970s and 1980s in the UK, US, Europe and elsewhere, was abandoned in favour of monetary rules that focus on interest rate manipulation by the central bank. The objective of these rules is to achieve specific, or a range of, inflation targets.

Bringing together a distinguished cast of international contributors, this book presents a collection of papers, which discuss the following issues amongst others:

• the stability of the macroeconomic equilibrium
• monetary policy divergences in the Euro area
• stock market prices
• the US post-‘new economy’ bubble
• the information economy
• inflation targeting.

This useful analysis of New Consensus Monetary Policy will be of great interest to financial economists and international monetary economists, as well as students and scholars of macroeconomics and finance.

Critical Acclaim

‘. . . this book provides a useful overview of the challenges facing the IT policy framework, both by pointing to the limitations of the underlying theory and, more importantly, by outlining the importance of a transparent policy framework for anchoring expectations. . . the book should be of interest to all central bankers and students of monetary policy.’
– Colin Rogers, Economic Record

Contributors

Contributors: N. Allington, P. Arestis, M. Baddeley, R. Ballinger, S. Bell-Kelton, G. Chortareas, V. FitzGerald, G. Fontana, C. Freedman, C. Goodhart, E. Karakitsos, J. McCombie, M. Roberts, M. Sawyer, M. Setterfield, A.P. Thirlwall, L.R. Wray

Contents

Contents: 1. Introduction 2. New Consensus Monetary Policy: An Appraisal 3. Central Bank Behaviour and the Stability of Macroeconomic Equilibrium: A Critical Examination of the ‘New Consensus’ 4. Monetary Policy Divergences in the Euro Area: The Early Record of the European Central Bank 5. Stock Market Prices and the Conduct of Monetary Policy under the New Consensus Monetary Policy 6. On the US Post-‘New Economy’ Bubble: Should Asset Prices be Controlled? 7. Monetary Policy in the Information Economy: Old Problems and New Challenges 8. The Monetary Policy Outcomes Curve: Can the Size and Structure of Public Debt Undermine Policy Objectives? 9. The Old Lady in New Clothes: Uncertainty and the UK Monetary Policy Framework 10. The Experience of Inflation Targeting since 1993 11. Reflections on the Bank of Canada’s Monetary Policy Framework 12. The Determinants of Saving in Developing Countries, and the Impact of Financial Liberalization 13. Monetary Models and Inflation Targeting in Emerging Market Economies 14. International Aspects of Current Monetary Policy Index