It is claimed that membership of the exchange rate mechanism (ERM) of the European Monetary System (EMS) gives countries a credibility bonus which reduces the output and employment costs of disinflation. Within the EMS this arises because of the commitment of participants in the ERM to maintain...

The conditions of the `new EMS' - an absence of exchange rate realignments and corresponding added credibility - have given rise to concern about the stabilization properties of the System. Nominal interest rate divergence may have been narrowed ahead of inflation divergence. Cross-country real...

We set out a reference chronology for annual UK inflation, identifying nine complete cycles between 1958 and 1990. Inflation over this period is asymmetric, falling more quickly than it rises. Leading indicators are also proposed, with composite shorter and longer leading indicators constructed....

The paper presents various tests of the hypothesis that, through the mechanism of the European Monetary System. Germany exercised a counter-inflationary leadership role in the 1980s. Evidence is provided that expectations of German inflation may be thought of as having impacted more strongly on...

The ineffectiveness of real devaluation as a stabilization policy does not imply that the nominal exchange rate should be held constant in the face of a domestic inflation. In this circumstance, import duties and export subsidies would have to be escalated to counter the potential erosion of the...

In several recent papers macroeconomic policy has been modelled in the context of a game of incomplete information. A central result of the work by Backus and Driffill and by Barro is that the uncertainty may provide an incentive for the government to maintain a socially efficient policy of zero...

This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. Traditionally, interest rates and forward exchange rates have been used to extract expected means of future interest rates, exchange rates...

This paper examines the distribution of output around capacity when money demand is a non-linear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of...

This paper considers fiscal and monetary policy in a short-run static macroeconomic model. There are two objectives, control of inflation and control over the growth of national wealth, and a third outcome of importance, a high level of employment. There are two instruments, monetary policy (the...

This paper proposes a conceptual framework to investigate the effects of central bank independence, of the degree of centralization of wage bargaining and of the interaction between those institutional variables, on real wages, unemployment and inflation. The labour market is characterized by...