Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-05T15:53:25.591Z Has data issue: false hasContentIssue false

Fiscal Policy and Interest Rates

Published online by Cambridge University Press:  26 March 2020

Extract

The Treasury Bill rate is regarded as an exogenous policy instrument in the National Institute's forecasting model. Other interest rates in the model are linked to this rate by term-structure equations. This approach, while justifiable for forecasting, has limitations when the model is used for policy simulations since it ignores the responses of interest rates to changes in economic conditions. This note shows how the properties of the model are affected when interest rates are treated as endogenous.

Type
Articles
Copyright
Copyright © 1984 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This note was written by Jane Darby of the National Institute. A. J. C. Britton and S. Brooks contributed to the background research.

References

Coghlan, R.T. (1975),‘Bank competition and bank size’ in Manchester School of Economic and Social Studies, vol. 43, June.CrossRefGoogle Scholar
Fisher, D. (1970), ‘The instruments of monetary policy and the generalised trade-off function for Britain, 1955-1968’, Manchester School of Economic and Social Studies, vol. 38, September.Google Scholar
Hall, S. (1984), ‘An improved solution technique for large economic models with consistent expectations’, NIESR, mimeo.Google Scholar
Laury, J.S.E., Lewis, G.R. and Ormerod, P.A. (1978), ‘Properties of macroeconomic models of the UK economy: a comparative study’, National Institute Economic Review, no. 83, February.CrossRefGoogle Scholar
Pissarides, C.A. (1972), ‘A model of British macroeconomic policy, 1955-1969’, Manchester School of Economic and Social Studies, vol. 40, September.Google Scholar
Third Report from the Treasury and Civil Service Committee, Session 1980-81, ‘Monetary Policy’, volume I, Report.Google Scholar