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UK policy coordination: the importance of institutional design

Author

Listed:
  • Ashok Bhundia
  • Gus O'Donnell

Abstract

This paper considers the principles that underpin the design of the UK's macroeconomic framework, with particular emphasis on the importance of good institutional design in ensuring effective coordination of monetary and fiscal policy when an independent Bank of England Monetary Policy Committee has operational responsibility for setting interest rates. The theoretical literature on policy coordination finds that the cost of central bank independence is less monetary- fiscal coordination. We argue that once account is taken of the institutional arrangements, this conclusion does not hold for the UK. In fact, the UK macroeconomic policy framework represents a significant improvement in policy coordination through mechanisms that allow for greater transparency and accountability in policy-making. Among the measures discussed in the paper is the role of the Treasury Representative on the Bank of England Monetary Policy Committee.

Suggested Citation

  • Ashok Bhundia & Gus O'Donnell, 2002. "UK policy coordination: the importance of institutional design," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 135-164, March.
  • Handle: RePEc:ifs:fistud:v:23:y:2002:i:1:p:135-164
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    Cited by:

    1. Shakir, Tamarah & Tong, Matthew, 2014. "The interaction of the FPC and the MPC," Bank of England Quarterly Bulletin, Bank of England, vol. 54(4), pages 396-408.
    2. Renee Philip & John Janssen, 2002. "Indicators of Fiscal Impulse for New Zealand," Treasury Working Paper Series 02/30, New Zealand Treasury.
    3. repec:taf:oabmxx:v:3:y:2016:i:1:p:1154283 is not listed on IDEAS

    More about this item

    JEL classification:

    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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