Journal Article

The assessment: macroeconomic policy

C Allsopp and D Vines

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 16, issue 4, pages 1-32
Published in print December 2000 | ISSN: 0266-903X
Published online December 2000 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/16.4.1
The assessment: macroeconomic policy

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This paper describes the emerging consensus about the 'reaction function' approach to macroeconomic policy. The first section of the paper describes the historical emergence of this consensus, as a synthesis of pre-Keynesian, Keynesian, and monetarist ideas. The theoretical part of the paper presents the basic framework of the approach and explains a number of extensions, including: finding the optimal reaction function, avoiding the problem of inflation bias, the relevance of the Taylor rule, forward-looking expectations, extensions to the open economy, and the interconnections between monetary and fiscal policy. The later parts of the paper contain a detailed discussion of some of the practical and institutional issues involved in the implementation of this new framework.

Journal Article.  0 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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