摘要:

Nearly two years after the I990peak in output, the economy continues to ‘bump along the bottom’ of an L‐shaped recession, which has turned into as severe a downturn as its predecessors in 1974‐5 and 1980‐1. The origins of the recession lie in the weakness of domestic demand, which has failed to respond to the 4.5per cent cut in interest rates that has taken place since we joined the ERM. It is now the turn of fiscalpolicy: public spending was raised in the Autumn Statement and, as the General Election approaches, the odds are on tax cuts in next month's Budget. This relaxation of monetary and fiscal policy should produce recovery and we see output moving ahead from the second quarter onwards. Nevertheless, the outlook for I992 is weaker than before: we forecast a rise in GDP of a little over I per cent, rather less for manufacturing industry. In 1993 and beyond n growth rate of around 2112per cent should be possible but it is the second half of next year before output passes its previous peak. This suggests that unemployment will rise for at least another year ‐ to a peak in the summer of I993 of 2.8 million. The combination of a stable exchange rate inside the ERM and protracted recession has produced a rapid reduction in inflation and the current account deficit. As long as the pound maintains its present parity, inflation should moderate further, to the 3–4 per cent range by the end of the year and beyond. On the trade side, in contrast, imports have already bottomed out and exports are struggling in a weak world economy. This suggests that, as the recovery gets under way, the deficit on current account will widen from last year's £6bn to £8bn this year an

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00160.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00161.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00162.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00163.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00164.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00165.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

摘要:

The ‘liverpool Six’have called again on the government to leave the Exchange Rate Mechanism and return to monetarism with flexible exchange rates. Our reason is simple. Monetary conditions here have been tightened more than dangerously by the need to support the pound within the ERM, just as in late 1987 and early 1988 they were loosened excessively by the need to hold the pound down in the attempted ‘shadow’ phase of the ERM. The has repeatedly undermined monetary stability, and has caused first renewed inflation and now severe and protracted recession. It has also tended to produce sterling overvaluation and so chronic balance of payments difficulties; to correct these, recession will need to be prolonged. In the havoc it has wreaked, it risks fuelling demands for a return to the government intervention of he past. As a source of counter inflationary discipline it is therefore flawed. We advocate a return to monetary targeting under floating rates. This would in the short term permit interest rates to fall sharply to stimulate recovery in money supply growth and hence the economy; the exchange rate would fall to a properly valued level, removing the threat to our balance of payments. In the longer term this policy shift would recreate a framework of counter‐inflation discipline in which there could still be reasonable domestic responses to cyclical and other

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00166.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

摘要:

I believe the choice of DM2.95 as a central rate for sterling's entry into the ERM was a major mistake of macroeconomic policy, on a par with monetary targeting and underestimatingtlle late 1980s' consumer‐led boom. Indeed it was a belief that we were about to make this mistake that led me to undertake, with colleagues at the National Institute of Economic and Social Research, a detailed and unique study of the choice facing policy makers. I shall have more to say on that study below. Shortly after entry I wrote: “The danger is that the government will attempt to defend the present exchange rate bands at all costs. As a result it may produce, or fail to prevent, a recession on the same scale as 1980‐81. (Wren‐Lewis, 1990, emphasis added). I fear that much of this has come to pass, but we still have a chance to retrieve something.To propose a devaluation of sterling within the ERM requires three distinct arguments. The first is that we entered the ERM at a real exchange rate which was above a level required to produce a sustainable current account of the balance of payments. The second is that this matters, and in particular that it has prevented the government from taking steps to counteract the recession. The third is that the gains in adjusting, through a realignment, to a lower rate now outweigh the loss of credibility that would be involved. I shall consider each point i

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00167.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00168.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY

摘要:

In June 1987 the Conservatives under Mrs. Thatcher were re‐elected with a majority of over 100 seats against Labour. They received 42.3 per cent of the total vote, the size of the majority owing much to the significant number of votes received by third parties. But it is also believed that the Conservatives' share of the vote, unchanged from 1983, reflected the performance of the macro economy. In the four years of Mrs. Thatcher's second term, output rose more than 3 per cent a year and by the time of the election inflation was below 1 per cent, interest rates were under 10 per cent, and unemployment had come back below 3 million.If Mrs. Thatcher and her Cabinet colleagues had planned an economic strategy for the next four (or five) years in order to be in a strong position to win a fourth term of office, it might have included the following factors: output growth of 2–3 per cent a year; inflation staying around 1 per cent; interest rates of 10 per cent or thereabouts; unemployment down further from the near‐3 million mark of June 1987. On our current forecast, that is, with the exception of output, the economic record of the Conservatives' third (Thatcher/Major) term. Yet the Conservatives have been running neck and neck with Labour in tile opinion polls and, barring unforeseen developments, the coming election will be extremely close, with the possibility still of either a small Conservative majority or a small Labour majority or even a hung Parliament.Why is it that, against the background of a similar economic performance in aggregate, the Conservatives have lost popularity? The arguments are complex and a full explanation would include the introduction of the community charge arid the fall of Mrs. Thatcher herself. But the economy is part of the explanation.The economic literature on Government popularity examines the state of a number of economic variables at the time of the election. At its most extreme, some believe that all a Government has to do to be re‐elected is deliver a low mortgage rate in time for the election. Other analysts have explained Government popularity in a simple regression framework, with a lagged dependent variable to capture sluggish adjustment.A weakness of this research is that it implicitly believes all the Government has to do is to ‘get it right on the night’. As long as the economy falls into place by the time of the election, re‐election is certain. This implies that the electorate both forgets and forgives, and is indifferent to the course of the economy in the previous three or four years. But it cannot be the case that the electorate evaluates only the average performance of the economy over the lifetime of a Parliament or even the most recent developments. As in any simple utility maximisation problem, it is not just the mean of the distribution that counts but also its variance. In other words the combination of late 1980s' boom and early 1990s' recession counts against the Government in a way that four or five years of steady progress would not have done. If this is correct, it may not be sufficient for the Government to deliver low inflation and interest rates and some recovery in output in time for the election; it may simply be that the electorate remains unforgiving of a five‐year track record o

ISSN:0140-489X    

DOI:10.1111/j.1468-0319.1992.tb00169.x

出版商:Blackwell Publishing Ltd    

年代:1992

数据来源: WILEY