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We consider the role of money as a means of payment, store of value and medium of exchange. I outline a number of quantitative and qualitative experiences of monetary management. Successful regimes have sprung up in a variety of surprising places, and been sustained with state (centralised) interventions. Although the link between state and money, and its standard of identity and account may be clear, particularly in earlier stages of economic development, the extent to which the state is widely felt to hold responsibility for ‘sound money’ is less clear in modern democracies, where there are many other public responsibilities implying ongoing trade‐offs. [ABSTRACT FROM AUTHOR]

Using the business cycle accounting (BCA) framework, we examine the 2008-9 recession in the UK. The recession appears to have been mostly driven by shocks to the efficiency wedge in total production, rather than intertemporal (asset price) consumption. From an expenditure perspective this result is consistent with the large observed falls in both consumption and investment. Simulated data from a dynamic stochastic general equilibrium (DSGE) model in which asset price shocks dominate finds no strong role for the intertemporal consumption wedge. This result implies that financial frictions work through more than just this channel. [ABSTRACT FROM AUTHOR]

Central bank independence is widely thought be a sine qua non of a credible commitment to price stability. The surprise decision by the UK government to grant operational independence to the Bank of England in 1997 affords us a natural experiment with which to gauge the impact on the yield curve from the adoption of central bank independence. We document the extent to which the decision to grant independence was ‘news’ and illustrate that the reduction in medium- and long-term nominal interest rates was some 50 basis points, which we show to be consistent with a sharp increase in policy-maker's aversion to inflation deviations from target. We therefore suggest that central bank independence represents one of the clearest signals available to elected politicians about their preferences on the control of inflation. [ABSTRACT FROM AUTHOR]

Examines inflation targeting in a New Keynesian model under credible commitment. Dominance of price level targeting over inflation targeting; Stability of the macroeconomy under a price level target; Difference in the degree of output and inflation variability.

Following Hall (Journal of Labor Economics, Vol. 15 (1997), pp. S223–S250) it is increasingly common to incorporate preference, as well as productivity, perturbations in calibrated general equilibrium models. We assess the performance of a small open economy stochastic growth model (based on the Blanchard–Yaari framework) under alternative driving processes. Whilst both models provide familiar descriptions of the aggregate economy, we find that the model driven by productivity disturbances has clear advantages in explaining the behaviour towards foreign asset accumulation. [ABSTRACT FROM AUTHOR]