Rules, Reputation and Macroeconomic Policy Coordination
Cambridge University Press, 3/9/2009
EAN 9780521104609, ISBN10: 0521104602
Paperback, 444 pages, 22.9 x 15.2 x 2.8 cm
Language: English
In this book David Currie and Paul Levine address a broad range of issues concerning the design and conduct of macroeconomic policy in open economies. Adopting neo-Keynesian models for which monetary and fiscal policy have short-term real effects, they analyse active stabilisation policies in both a single- and multi-country context. Questions addressed include: the merits of simple policy rules, policy design in the face of uncertainty and international policy coordination. A central feature of the book is the treatment of credibility and the effect of a policy-maker's reputation for sticking to announced policies. These considerations are integrated with coordination issues to produce a unique synthesis. The volume develops optimal control methods and dynamic game theory to handle relationships between governments and a conscious rational private sector and produces a unified, coherent approach to the subject. This book will be of interest to students and teachers of open economy macroeconomics and to professional economists interested in using macroeconomic models to design policy.
Introduction
Part I. General Issues
1. Macroeconomic policy design and control theory - a failed partnership?
2. International policy coordination - a survey
3. The European road to monetary union
Part II. Theory and Methodology
4. The design of feedback rules in linear stochastic rational expectations models
5. Credibility and time consistency in a stochastic world
6. Should rules be simple?
7. Macroeconomic policy design using large econometric rational expectations models
Part III. Fiscal and monetary policy in interdependent economies
8. Macroeconomic policy design in an interdependent world
9. Does international macroeconomic policy coordination pay and is it sustainable?
a two-country analysis
10. International cooperation and reputation in an empirical two-bloc model
11. Fiscal policy coordination, inflation and reputation in a natural rate world
12. The use of simple rules for international policy coordination
13. Evaluating the extended target zone proposal for the G3
Bibliography
Index.