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Chapter I. The Medium Term: Prospects and Problems

Published online by Cambridge University Press:  26 March 2020

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Extract

The focus of interest of macroeconomic policy has been moving away from the short term towards the medium term. Partly this is because the present recession, already deeper than any experienced since the war, seems still to have some way to go, and the question is hotly debated when, and how strongly, a recovery may be expected to come. But, with the new government, there has also been a significant shift in the attitude towards management of the economy. The government's objectives for the medium term, enunciated in the Financial Statement and Budget Report 1980-81, are ‘to bring down the rate of inflation and to create conditions for a sustainable growth of output and employment’. This reduction in the rate of inflation is to be brought about by a ‘Medium-Term Financial Strategy’ which is based on the idea that the role of government should be to announce, and subsequently adhere to, a sequence of declining targets for £M3 and the PSBR.

Type
Articles
Information
National Institute Economic Review , Volume 94 , November 1980 , pp. 6 - 19
Copyright
Copyright © 1980 National Institute of Economic and Social Research

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References

page 6 note (1) HC 500, HMSO, 26 March 1980, pp. 16-19 (hereinafter referred to as FS and BR).

page 7 note (1) P. J. Forsyth and J. A. Kay ‘The economic implications of North Sea oil revenues’, Institute of Fiscal Studies, Working Paper no. 10, 1980 (a heavily revised version was published in Fiscal Studies in July 1980).

page 13 note (1) The devaluation is simulated by imposing an appropriate ‘residual adjustment’ on the exchange rate equation compared with the base. Feedback effects entail that the final change in the exchange rate is different.

page 14 note (1) Some small fluctuations round the 1981 level are still present in the series.