The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.
This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.
This paper analyses the general equilibrium and disequilibrium effects of fiscal policy when fiscal instruments have direct impacts on both aggregate supply and demand. A model is specified which incorporates the direct impacts of expenditure and tax instruments on the behavioural function for individuals and firms and which explicitly recognises the role of public production and supply. In contrast to simple Keynesian and neoclassical models, this model involves direct supply‐side crowding out and budget composition effects that operate on both aggregate demand and supply. It also reveals the relative efficiency of various “balanced instruments” under Keynesian and neoclassical conditions.
The recent publication of a sixth edition of Dornbusch and Fischer’s (D&F’s) Macroeconomics will be of interest to many teachers of macro theory. D&F’s text must currently…
The recent publication of a sixth edition of Dornbusch and Fischer’s (D&F’s) Macroeconomics will be of interest to many teachers of macro theory. D&F’s text must currently be one of the most widely used intermediate‐level guides to macroeconomics; as the authors themselves tell us, the book has been translated into many languages and is in use around the world “from Canada to Argentina and Australia, all over Europe, in India, Indonesia and Japan, from China and Albania to Russia”. The undogmatic “middle‐of‐the‐road” approach, together with the careful and clear presentation characteristic of this user‐friendly textbook, has won it many friends.
This note shows that much conventional macro‐economic literature uses two inconsistent definitions of equilibrium in the commodity market. Equilibrium is defined as income…
This note shows that much conventional macro‐economic literature uses two inconsistent definitions of equilibrium in the commodity market. Equilibrium is defined as income equalling expenditure when deriving the IS curve; but when overall equilibrium is treated the requirement for equilibrium is that planned supply equals planned demand. The note shows that these inconsistent definitions lead to a confusing and often erroneous exposition of disequilibrium behaviour.