Monetary Policy and International Competitiveness / Willem H. Buiter, Marcus H. Miller.

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Buiter, Willem H

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0591.Publication details: Cambridge, Mass. National Bureau of Economic Research 1980.Description: 1 online resource: illustrations (black and white)Subject(s):

F - International Economics

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Abstract: A model of Dornbusch is adapted to analyze the consequences for output and competitiveness of certain aspects of the U.K. government's medium term financial strategy and some other policy actions. This includes the announcement of a sequence of reductions in the target rate of monetary growth, an increase in VAT and a move to make the U.K. banking system more competitive. The impact of a discovery of domestic oil is also modeled. We consider the consequences of varying the degree of inertia in the underlying rate of inflation and of different rates of international capital mobility. A real interest rate equalization tax stabilizes the real exchange rate but not the level of output. Once and for all changes in the level of the nominal money stock to accommodate changes in the demand for real money balances prevent 'overshooting' of the real exchange rate and fluctuations in output. It may, however, undermine the credibility of an announced policy of monetary disinflation.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0591 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w0588 Inflation, Taxation, and Corporate Behavior /	nber w0589 Unanticipated or Actual Changes in Aggregate Demand Variables: A Cross-Country Analysis /	nber w0590 A Model of the Black Market for Dollars /	nber w0591 Monetary Policy and International Competitiveness /	nber w0592 Oil, Disinflation, and Export Competitiveness: A Model of the "Dutch Disease" /	nber w0593 Symmetry Restrictions in a System of Financial Asset Demands: A Theoretical and Empirical Analysis /	nber w0594 Taxes and Corporate Capital Structure in an Incomplete Market /	Next

December 1980.

A model of Dornbusch is adapted to analyze the consequences for output and competitiveness of certain aspects of the U.K. government's medium term financial strategy and some other policy actions. This includes the announcement of a sequence of reductions in the target rate of monetary growth, an increase in VAT and a move to make the U.K. banking system more competitive. The impact of a discovery of domestic oil is also modeled. We consider the consequences of varying the degree of inertia in the underlying rate of inflation and of different rates of international capital mobility. A real interest rate equalization tax stabilizes the real exchange rate but not the level of output. Once and for all changes in the level of the nominal money stock to accommodate changes in the demand for real money balances prevent 'overshooting' of the real exchange rate and fluctuations in output. It may, however, undermine the credibility of an announced policy of monetary disinflation.