This paper studies the interactions of fiscal policy and monetary policy when they stabilize a single economy against shocks in a dynamic setting. If both policy-makers are benevolent, then, in our model, the best outcome is achieved when monetary policy does nearly all of the stabilization. If...

In this paper we analyse counter-cyclical fiscal policy within the context of a microfounded analysis of business-cycle stabilization. We show that tax and spending instruments can have a useful counter-cyclical role, even after allowing for the distortionary nature of the instruments and the...

The use of discretionary fiscal policy as a counter-cyclical tool has declined in popularity over the last 30 years. This paper examines the extent to which this decline is justified in terms of developments in macroeconomic theory over this period. Both a small calibrated model and a larger...

This paper explores the Labour government’s fiscal policy performance at the macroeconomic level. This analysis is in two halves. The first covers the period up until the Great Recession, which involved a single policy regime subject to two simple fiscal rules. After discussing the theoretical...

This paper begins by arguing that the 2007-8 credit crunch does not require a fundamental re-evaluation of monetary policy. The crunch occurred because regulation was too lax, and we need to develop new and more effective tools of regulatory control. To focus on current account imbalances or...

This article, which serves as an introduction to the <italic>Oxford Review of Economic Policy</italic>’s issue on ‘Macroeconomic Policy Coordination: Global Imbalances and Global Growth’, charts the evolution of international macroeconomic policy coordination from the end of the Second World War until the...

There is a thriving debate on the usefulness of economic models for policy analysis which this paper explores. It argues that there is a need for models that incorporate both the modern intertemporal approach to macroeconomics and short-run ad-hoc behaviour. This need cannot be met by the simple...

In this paper we discuss the emergence of the new European macroeconomic structure within EMU. We focus on three important elements: the wage-fixing authorities in each country, the fiscal authorities in each country, and the single European Central Bank (ECB). We identify serious problems which...

This article examines the new consensus that fiscal policy should have no macroeconomic role in 'flexible inflation targeting' regimes. There is little basis for this presumption. Fiscal policy remains important in setting the policy mix and in managing shocks and imbalances. The credibility of...