Long-run Inflation-Unemployment Dynamics: The Spanish Phillips Curve and Economic Policy

This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call "frictional growth", i.e. the interaction between money growth and nominal frictions. After presenting theoretical models of this phenomenon, we construct an empirical model of the Spanish economy and, in this context, we evaluate the long-run inflation-unemployment trade for Spain and examine how recent policy changes have afected it.

Monetary policy strategies, financial institutions and financial markets in the Middle East and North Africa: an overview

Three polar types of monetary architecture are identified together with the institutional and market infrastructure required for each type and the kinds of monetary policy feasible in each case: a ‘basic’ architecture where there is little or no financial system as such but an elementary central bank which is able to fix the exchange rate, as a substitute for a proper monetary policy; a ‘modern’ monetary architecture with developed banks, financial markets and central bank where policy choices include types of inflation targeting; and an ‘intermediate’ monetary architecture where less market-based monetary policies involving less discretion are feasible. A range of data is used to locate the various MENA countries with respect to these polar types. Five countries (Iran, Libya, Sudan, Syria and Yemen) are identified as those with the least developed monetary architecture, while Bahrain and Jordan are identified as the group at the other end of the spectrum, reaching beyond the intermediate polar type in some dimensions but not others. The countries in between vary on different dimensions but all lie between basic and intermediate architectures. The key general findings are that the MENA countries are both less differentiated and less ‘developed’ than might have been expected. The paper ends by calling for research on the costs and benefits of different types of monetary architecture.

IPH response to DSD Urban Regeneration and Community Development Policy Framework Consultation

The Urban Regeneration and Community Development Policy Framework for Northern Ireland sets out for DSD and its partners, clear priorities for urban regeneration and community development programmes, both before and after the operational responsibility for these is transferred to councils under the reform of local government. Four policy objectives have been developed, which will focus on the underlying structural problems in urban areas and also help strengthen community development throughout Northern Ireland. The policy objectives are as follows: Policy Objective 1 – To tackle area-based deprivation: Policy Objective 2 – To strengthen the competitiveness of our towns and cities: Policy Objective 3 – To improve linkages between areas of need and areas of opportunity: and Policy Objective 4 –To develop more cohesive and engaged communities. Key points from IPH response Urban regeneration and community development provide a basis for addressing the social determinants of health and reducing inequalities in health. This policy framework presents an opportunity for coherence and complementarity with ‘Fit and Well - Changing Lives’ as part of government’s overall approach to tackling health inequalities. It is now well established that a focus on early years’ interventions and family support services yields significant returns, so prioritising action in these areas is essential. Defined action plans on child poverty are essential if this policy framework is to make a real and lasting difference in deprived urban areas. Development of the environmental infrastructure to improve health in deprived areas should be supported by well-planned monitoring and evaluation. Linking the policy framework to economic development and local community plans will enhance effectiveness in the areas of education, job creation, commercial investment and access to services, which in turn are critical for the economic growth and stability of urban communities. Community profile data and health intelligence (as available through IPH Health Well) could usefully inform central and local government in terms of resource allocation and targeted service delivery.

A Study of a Staff Alcohol Policy in a Large Public Health Organisation, Looking at the Policy Content, the Policy Development and the Implementation Process, and the Policy Impact

There are different approaches to dealing with alcohol related problems in the workplace. A literature review indicates that two of the models that underpin programmes to deal with alcohol related problems in the workplace are the disease model and the health promotion model. The disease model considers alcoholism as an illness and uses curative techniques to restore the individual to sobriety. The health promotion model looks at the determinants of health and promotes changes in the environment and structures, which would support healthy behaviour in relation to alcohol. Employee Assistance Programmes (EAPs) may have elements of both theses models. Dealing with alcohol problems at work involves a captive audience and the workplace as a setting can be used to influence healthier lifestyles. A workplace alcohol policy is a mechanism through which alcohol related issues might be dealt with, and the necessary resources and commitment of managers and staff channelled to this end. The policy aims should be clear and unambiguous, and specific plans put in place for implementing all aspects of the policy. In the case of the alcohol policy in the organisation under study, the policy was underpinned by a health promotion ethos and the policy document reflects broad aims and objectives to support this. The steering group that oversaw the development of the policy had particular needs of their own which they brought to the development process. The common theme in their needs was how to identify and support employees with alcohol related problems within an equitable staff welfare system. The role of the supervisor was recognised as crucial and training was provided to introduce the skills needed for an early intervention and constructive confrontation with employees who had alcohol related problems. Opportunities provided by this policy initiative to deal with broader issues around alcohol and to consider the determinants of health in relation to alcohol were not fully utilised. The policy formalised the procedures for dealing with people who have alcohol related problems in an equitable and supportive manner. The wider aspect of the health promotion approach does not appear to have been a priority in the development and implementation of the policy.This resource was contributed by The National Documentation Centre on Drug Use.

Policy and the Evolution of the US Economy: 1948-2002

This paper investigates the relationship between monetary policy and the changes experienced by the US economy using a small scale New-Keynesian model. The model is estimated with Bayesian techniques and the stability of policy parameter estimates and of the transmission of policy shocks examined. The model fits well the data and produces forecasts comparable or superior to those of alternative specifications. The parameters of the policy rule, the variance and the transmission of policy shocks have been remarkably stable. The parameters of the Phillips curve and of the Euler equations are varying.

Monetary policy rules and macroeconomic stability: Evidence and some theory

We estimate a forward-looking monetary policy reaction function for thepostwar United States economy, before and after Volcker's appointmentas Fed Chairman in 1979. Our results point to substantial differencesin the estimated rule across periods. In particular, interest ratepolicy in the Volcker-Greenspan period appears to have been much moresensitive to changes in expected inflation than in the pre-Volckerperiod. We then compare some of the implications of the estimated rulesfor the equilibrium properties of inflation and output, using a simplemacroeconomic model, and show that the Volcker-Greenspan rule is stabilizing.

Fiscal policy, pricing frictions and monetary accommodation

We investigate the theoretical conditions for effectiveness of government consumptionexpenditure expansions using US, Euro area and UK data. Fiscal expansions taking placewhen monetary policy is accommodative lead to large output multipliers in normal times.The 2009-2010 packages need not produce significant output multipliers, may havemoderate debt effects, and only generate temporary inflation. Expenditure expansionsaccompanied by deficit/debt consolidations schemes may lead to short run output gains buttheir success depends on how monetary policy and expectations behave. Trade opennessand the cyclicality of the labor wedge explain cross-country differences in the magnitude ofthe multipliers.

Regulatory ambivalence and the limitations of pharmaceutical policy in Spain

Broadly speaking, pharmaceutical policy in Spain has been unable to control either the price or thevolume of drugs prescribed. Limited attempts have been made to bring together the regulation of thepharmaceutical market and policies, in pursuit of the desired goals of efficiency and quality. Thispaper assesses the regulation of the Spanish pharmaceutical market over the last two decades byexamining regulation and policy and the available empirical evidence on their appreciable effects,and presents recommendations for policy design. Our findings suggest that policies aiming to improveefficiency and quality have not managed to contain costs, while cost-effectiveness is still overlooked.We argue that future policies should encourage broader participation in the decision-making processesand promote a higher degree of competition, especially from generic drugs.

Monetary policy shocks and transmission in Italy: A VAR analysis

This paper provides updated empirical evidence about the real and nominal effects of monetary policy in Italy, by using structural VAR analysis. We discuss different empirical approaches that have been used in order to identify monetary policy exogenous shocks. We argue that the data support the view that the Bank of Italy, at least in the recent past, has been targeting the rate on overnight interbank loans. Therefore, we interpret shocks to the overnight rate as purely exogenous monetary policy shocks and study how different macroeconomic variables react to such shocks.

Monetary policy in the Euro area: Lessons from 5 years of ECB and implications for Turkey

We examine monetary policy in the Euro area from both theoretical and empirical perspectives. We discuss what theory tells us the strategy of Central banks should be and contrasts it with the one employed by the ECB. We review accomplishments (and failures) of monetary policy in the Euro area and suggest changes that would increase the correlation between words and actions; streamline the understanding that markets have of the policy process; and anchor expectation formation more strongly. We examine the transmission of monetary policy shocks in the Euro area and in some potential member countries and try to infer the likely effects occurring when Turkey joins the EU first and the Euro area later. Much of the analysis here warns against having too high expectations of the economic gains that membership to the EU and Euro club will produce.

The new Keynesian approach to monetary policy analysis: Lessons and new directions

I discuss several lessons regarding the design and conduct of monetary policy that have emerged out of the New Keynesian research program. Those lessons include the bene.ts of price stability, the gains from commitment about future policies, the importance of nat-ural variables as benchmarks for policy, and the bene.ts of a credible anti-inflationary stance. I also point to one challenge facing NK modelling efforts: the need to come up with relevant sources of policy tradeoffs. A potentially useful approach to meeting that challenge, based on the introduction of real imperfections, is presented.

Monetary policy and rational asset price bubbles

I examine the impact of alternative monetary policy rules on arational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interestrates in response to a growing bubble is shown to enhance the fluctuations in the latter, through its positive effect on bubble growth. Theoptimal monetary policy seeks to strike a balance between stabilization of the bubble and stabilization of aggregate demand. The paper'smain findings call into question the theoretical foundations of the casefor "leaning against the wind" monetary policies.

Policy attitudes, ideological values and social representations

This article reviews research on policy attitudes and ideological values from the perspective of social representations theory. In the first part of the paper, key features of lay political thinking are presented, its pragmatic imperative, its focus on communication and the social functions of shared knowledge. Objectification transforms abstract and group-neutral ideological values into concrete and socially useful knowledge, in particular stereotypes of value-conforming and value-violating groups. Such shared understandings of intergroup relations provide citizens with common reference knowledge which provides the cognitive and cultural basis of policy attitudes. Social representations theory further suggests that lay knowledge reflects the social context in which it has been elaborated (anchoring), an aspect which allows conceptualising aggregate-level differences in policy attitudes. In the second part of the paper, a model of lay conceptions of social order is outlined which organises four shared conceptions of social order, along with the stereotype-based thinking associated with each conception: Moral order, Free Market, Social diversity and Structural inequality. We conclude by arguing that policy attitudes are symbolic devices expressed to justify or to challenge existing social arrangements.

Policy Environment and Public Service Motivation

This article analyzes whether and to what extent the policy environment of civil servants has an impact on their level of Public Service Motivation (PSM). It hypothesizes that public employees working in different policy domains and stages of the policy cycle are diversely motivated by four PSM orientations (Compassion, Commitment to the public interest, Self-sacrifice and Attraction to politics). The empirical results are based on a survey of 6885 Swiss civil servants. They show that those in charge of Welfare State policies are inclined to have higher levels of 'Compassion', whereas those performing core state functions report lower levels. Furthermore, employees whose main tasks are related to policy formulation display high levels of the 'Attraction to politics' dimension of PSM. This study questions the generalization of previous findings on PSM that are based on heterogeneous survey populations.