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Are the European Central Bank and Bank of England Macroeconomic Models Consistent with the New Consensus in Macroeconomics?

Author

Listed:
  • Philip Arestis

    (Cambridge Centre for Economic and Public Policy, University of Cambridge)

  • Malcolm Sawyer

    (Leeds University Business School, University of Leeds)

Abstract

The focus of this paper is on the extent to which the macroeconomic models developed by the European Central Bank (ECB) and the Bank of England (BoE) are consistent with the 'New Consensus Macroeconomics' (NCM for short). The macroeconometric models are important in two respects. First, they are used as a key element in the forecasting of macroeconomic variables, notably inflation, output and employment, which then help to inform the decisions made by the respective Committees that are responsible for reaching relevant decisions on interest rates. Second, they should reflect the general theoretical stance of the economic advisers and policy makers of the Central Banks, which informs their general outlook on the economy. We examine the theoretical aspects of both the NCM model and those of the other two models along with the policy implications and monetary practice of the two central banks. We closely consider the consistency between the two macroeconomic models and the NCM.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2008. "Are the European Central Bank and Bank of England Macroeconomic Models Consistent with the New Consensus in Macroeconomics?," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 11(2), pages 51-68, Winter.
    • Handle: RePEc:ekn:ekonom:v:11:y:2008:i:2:p:51-68
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    Citations

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    Cited by:

    1. Philip Arestis & Fernando Ferrari-Filho & Luiz Fernando de Paula, 2011. "Inflation targeting in Brazil," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(2), pages 127-148.
    2. Emiliano Brancaccio & Giuseppe Fontana, 2013. "'Solvency rule' versus 'Taylor rule': an alternative interpretation of the relation between monetary policy and the economic crisis," Cambridge Journal of Economics, Oxford University Press, vol. 37(1), pages 17-33.
    3. Philip Arestis, 2012. "Fiscal policy: a strong macroeconomic role," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 93-108.
    4. Marco Passarella, 2013. "Financial Integration in the European Union: an Analysis of ECB’s role," Working papers wpaper04, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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