Fiscal councils now exist in a number of countries.  This paper first considers the extent of deficit bias, potential explanations for it, and how independent institutions could help reduce it.  Are fiscal councils complements to or substitutes for fiscal rules, and why do none at  present...

The apparent success of independent central banks in conducting monetary policy has led many to argue that some form of policy delegation should also be applied to the macroeconomic aspects of fiscal policy.  A number of countries have recently established Fiscal Councils, although their role...

Fundamental Equilibrium Exchange Rates, or FEERs, are defined as the real exchange rate which would prevail if the economy were to be in internal and external equilibrium. As such they have been widely used both for policy purposes and as a method of calculating the level to which the real...

With the adoption of an explicit inflation target in the UK, there has been renewed interest in the properties of alternative feedback rules for interest rates based on an inflation target. In this paper we compare the stabilisation properties of the two forms of feedback rule that have been...

Governments have often combined a monetary policy involving setting nominal interest rates with a fiscal policy that did not seek to target a nominal value of the debt stock. In a model with a traditional backward looking Phillips curve, this fiscal and monetary policy mix may not be stable. If...

This paper assesses the scale of the costs of European Monetary Union when shocks are asymmetric. This is done considering time consistent policies within a small theoretical two country model, with parameter values chosen from empirical work. The model builds on earlier work by incoporating a...

Taylor rules which link short-term interest rates to fluctuations in inflation and output, have been shown to be a good guide (both positively and normatively) to the conduct of monetary policy. As a result they have been used extensively to model policy in the context of both closed and open...

This paper investigates the importance of ?scal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in in?ation and non-Ricardian consumers, and derive optimal simple rules for ?scal...

We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output...

We generalise the analysis of inflation bias with dynamic Phillips curves in three respects. First, we examine the discretionary (time consistent) solution in cases where the Phillips curve has both a backward looking and forward-looking component. Second, we show that the commitment (time...