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This paper constructs a new chronology of the business cycle in the United Kingdom from 1700 on an annual basis and from 1920 on a quarterly basis to 2010. The new chronology points to several observations about the business cycle. First, the cycle has significantly increased in duration and amplitude over time. Second, contractions have become less frequent but are as persistent and costly as at other times in history. Third, the typical recession has been tick‐shaped with a short contraction and longer recovery. Finally, the major causes of downturns have been sectoral shocks, financial crises, and wars. [ABSTRACT FROM AUTHOR]

Not so very long ago, I argued that it was possible to characterise modern monetary and fiscal policy in the UK as a function of three key events: exit from the European Exchange Rate Mechanism in September 1992, the election of 'New Labour' in May 1997 and the global financial crisis of 2007–2009. The first led to the adoption of a domestic inflation target in October 1992, the second to the operational independence of the Bank of England and the establishment of the Monetary Policy Committee and the third to the acceptance of the need for macro-prudential policies, extraordinary monetary interventions to augment a simple interest rate rule and formal budgetary oversight by a fiscal council. The latter was provided by the Office for Budget Responsibility, which was established in 2010. [ABSTRACT FROM AUTHOR]

Stabilization policy involves joint monetary and fiscal rules. We develop a model enabling us to characterize systematic simple monetary and fiscal policy over the business cycle. We principally focus on the following question. What are the key properties of the joint simple rule governing the conduct of systematic stabilization policy? We find that conducting stabilization policy incorporates not only a set of monetary policy choices governed by the so-called 'Taylor principle' but also fiscal policy that gives considerable force to automatic stabilizers. Recent US and UK monetary and fiscal choices seem broadly consistent with this model. This result is found to be robust to a number of alternate modeling strategies. JEL classification: E21; E32: E52; E63 Keywords: Optimal simple rules; Monetary and fiscal policy; Finite lives

The key stochastic influences on inflation without resource to ad hoc cost or excess demand shocks is determined for the New Keynesian Phillips Curve (NKPC) in inflation-output space. The econometric implementation of NKPC, which evolves strictly according news on the stream of future marginal costs, allows to derive inflation as a forecast of future variables.

This is a study of the behaviour of the price level during several commodity standards using price indices of seven major industrialized countries over two sample periods. Findings are that in postwar periods, policy makers focus on reduction of inflation uncertainty.

In a New Keynesian macroeconomic model under credible commitment, price level targeting dominates inflation targeting. But with sufficient inflation aversion the inflation-targeting central bank can produce quantitatively similar results to one targeting the price level. The current degree of inflation aversion demonstrated by the Bank of England may be sufficient to reap the benefits of price level targeting.

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.