Evaluating Policy Regimes: New Research in Empirical Macroeconomics

Evaluating Policy Regimes: New Research in Empirical Macroeconomics

Evaluating Policy Regimes: New Research in Empirical Macroeconomics

Evaluating Policy Regimes: New Research in Empirical Macroeconomics

Synopsis

"Economists have long debated the theoretical merits - for an individual nation and for a multi-nation world economy - of alternative approaches to the conduct of economic policy. Yet theory alone cannot resolve the important issues at stake. Only after the robustness of policy regimes has been carefully examined with empirical evidence will policymakers and economists be able to reach more of a consensus. This pathbreaking volume takes major steps forward in meeting the need for a combination of theoretical and empirical evaluations of alternative policy regimes. Bringing together individuals and groups doing pioneering research on macroeconomic interactions, it explores what approach to monetary policy would lead to superior performance by individual national economies and the world economy as a whole. Many parts of the book use the analytical techniques of stochastic simulation, an evaluation procedure increasingly employed at the frontier of empirical economic analysis. The book provides a summary of the key issues involved in evaluating policy regimes and clarifies the relationships among those issues. The authors examine the stabilization properties of alternative monetary-policy regimes and analyze how well various regime types perform in the face of unexpected shocks to national economies. Among their conclusions, they find that some simplified regimes for monetary policy are markedly less promising than others for achieving the stabilization objectives commonly sought by policymakers. Evaluating Policy Regimes is another major installment in a continuing worldwide research project, sponsored by the Brookings Institution, to improve empirical knowledge about the interdependence of national economies. Previous volumes include Macroeconomic Policies in an Interdependent World (1989), External Deficits and the Dollar (1988), and Empirical Macroeconomics for Interdependent Economies (1988)." Title Summary field provided by Blackwell North America, Inc. All Rights Reserved

Excerpt

Economists have long debated the theoretical merits of alternative approaches to the conduct of economic policy, typically referred to as different "policy regimes." Some of the debate focuses on issues that are primarily "domestic" for individual nations. in the case of monetary policy, for example, should authorities try to achieve targets for growth of the money supply, for nominal income, or some other objective? Other parts of the debate, such as that over exchange-rate arrangements, arise because the economies of many nations influence one another through trade in goods and services and capital movements. Theory alone cannot determine which approach for conducting monetary policy works best or how policies in one country influence others. Policymakers and economists can reach an informed consensus on which economic interventions to use only after the effects of each approach have been carefully examined with such tools as multicountry empirical models.

This book breaks new ground by combining theoretical and empirical evaluation of alternative policy regimes. It draws on the expertise of leading researchers on the systemic behavior of the global economy. a large body of new empirical evidence was generated for the project. Many parts of the book use "stochastic simulation," an evaluation procedure in which the response to a large number of policy interventions is repeatedly estimated. This technique is at the frontier of empirical economic analysis.

The book constitutes another installment of a continuing worldwide research project to improve empirical knowledge about the interdependence of national economies. the project and the publication of this book reflect the support and assistance of many people and institutions. Particular thanks and credit are due to the modeling groups and individuals whose contributions are the core of the project: staff members of the National Institute for Economic and Social Research in London and of the London Business School who jointly maintain versions of the global economic model known as gem (especially Ray Barrell and David A. Currie); the team of economists responsible for the . . .

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