Eurozone economies were the most adversely affected by the Global Financial Crisis, with forecast macroeconomic outcomes still highly uncertain. This article argues first that the Eurozone policy framework can be viewed as neo-liberalism overlaid with policy constraints associated with a mis-specified Optimum Currency Area. We are critical of this framework since it is incompatible with the policy sovereignty that is experienced, if not utilised, by sovereign economies such as the USA, UK and Australia. Second, recent and proposed policy reforms which generally lie within the constraints of the Eurozone framework are examined. We conclude that these policies are piecemeal and fail to restore policy sovereignty, which ultimately requires that member countries exit the Eurozone. Key issues associated with such an exit are briefly discussed.

This article examines the role of government in Malaysia’s history of economic development. In addressing two key challenges – inter-ethnic inequalities, conflicts and tensions, and exposure to global trade and economic relations – the Malaysian government has become directly involved in the economy. Strong government has played a role in Malaysia’s economic success in a range of ways, from 5-year plans to specific industry promotion and the creation of organisations for particular economic development purposes. Government has also been aware of environmental changes and in response has modified its strategies, established new organisations and invested in innovative ventures. Thus, while the drivers of economic development in Malaysia have been deeply embedded structural phenomena, the actual economic development path taken has been determined by the actions of the Malaysian government in concert with other stakeholders.

The part played by unemployment in the rise to power of Hitler weighed on the minds of leaders in Western democracies. There was a determination to create a world in which large-scale unemployment was abnormal and at worst only a temporary phenomenon. The war had shown that this was possible in a community united to pursue a common goal and the aim was to create such a community in a world free from the horrors of war, by creating communities in which the welfare of every person was important. Australia was remarkably successful in achieving this for 30 years. Its success depended on governments responding to any sustained increase in unemployment by undertaking large increases in public sector expenditure supported by accommodating monetary policy and tax cuts if desirable. In bad times as well as good, there was a determination to ensure that both the incomes and prices paid for necessities by the less well-off did not force anyone to live in poverty. The biggest obstacle to achieving this today is the growth of neoliberalism with its emphasis on ‘freedom’ or giving individuals the ability to act as they please with minimal constraints and an ideological commitment to small government.

There is no consensus on the existence of welfare gains from international monetary policy cooperation. This study adds to the debate by providing a new open macroeconomics model with incomplete exchange rate pass-through. We find that, from a global perspective, the welfare gains from international monetary policy cooperation arise with incomplete exchange rate pass-through. Furthermore, the country’s incentive for cooperation increases with its degree of exchange rate pass-through. Cooperation benefits small countries with high pass-through; however, it is disadvantageous to large countries with low pass-through. In addition, when there is in the absence of cooperation, fixed exchange rate regime is preferred for a country suffering from monetary uncertainty, particularly for small economies with high exchange rate pass-through.

This paper seeks to understand the link between resource governance and investor expectations in resource-rich countries. We test whether voluntary membership in the Extractive Industries Transparency Initiative (EITI), a public-private partnership that promotes transparency and accountability in the extractives sector, behaves as a credible signalling mechanism to investors that governments in resource-rich countries can manage resource revenue and adhere to sustainable fiscal policies in the medium and long run. Using an interrupted time series analysis coupled with a fixed effects model, we examine whether investor expectations on the price of sovereign debt behave as a credible signalling mechanism in the presence of certain conditions. Results indicate that in some cases there is a significant change in spread on the default price of sovereign debt as a result of announcement of either EITI candidacy or EITI compliance. However, it is clear that EITI membership alone is not a sufficient signal to investors that a country can effectively manage its resource revenues in the long run because the result of EITI implementation is heavily influenced by country-specific conditions.

We examine the net benefits of social distancing to slow the spread of COVID-19 in USA. Social distancing saves lives but imposes large costs on society due to reduced economic activity. We use epidemiological and economic forecasting to perform a rapid benefit–cost analysis of controlling the COVID-19 outbreak. Assuming that social distancing measures can substantially reduce contacts among individuals, we find net benefits of about $5.2 trillion in our benchmark case. We examine the magnitude of the critical parameters that might imply negative net benefits, including the value of statistical life and the discount rate. A key unknown factor is the speed of economic recovery with and without social distancing measures in place. A series of robustness checks also highlight the key role of the value of mortality risk reductions and discounting in the analysis and point to a need for effective economic stimulus when the outbreak has passed.

Economists understand that a fit for purpose policy regime requires a reliable general equilibrium model of the system in question and a well specified description of the objectives that the policymaker is trying to pursue. The current financial stability regime has neither and without these critical foundations the regime is fundamentally fragile and incomplete. There is no anchor on the conduct of policy, an absence in genuine accountability and, as a result, reputational risks for policy institutions.

The Scotland Bill 2015–16 would make the Scottish government one of the most powerful sub-central governments in the OECD in terms of its control over spending and taxation. The UK government has also announced plans to introduce ‘English Votes for English Laws’ (EVEL), where the support of a majority of English MPs would be necessary to pass legislation deemed to impact on England only. The objective of this paper is to examine the potential for spillovers to arise in monetary unions of asymmetric nations where fiscal policy choices are taken locally. We extend a model of Chari and Kehoe (2008) to show the sub-optimal consequences of devolved fiscal policy in a moneteary union with a dominant member state. Because England is so much larger than the other constituent nations of the UK, its fiscal policy choices will have a commensurately stronger impact on UK monetary policy. As a result, UK monetary policy might be inappropriate for the smaller nations, calling into question the economic efficiency of EVEL. This is a general result which arises from the asymmetry of nations rather than specific UK funding arrangements or behavioural responses.

After the 2001 crisis, Turkey continued to pursue the radical market-oriented reform strategy that had started in the early 1980s and followed the philosophy of the Washington Consensus. Gross domestic product (GDP) growth in the post-2001 period was relatively high, but it was a “jobless” growth caused by substantial productivity increases generated largely by intensifying the work process rather than by technological advancements. Economic growth in the post-2001 period benefited society very unequally. The growth regime of Turkey is vulnerable owing to high current account deficit; high currency mismatch, particularly in the corporate sector; high income inequality; high unemployment; and an unsatisfactory development of the industrial sector, despite some successes. We recommend a new development regime with selective capital controls, a balanced current account, an active industrial policy by the government, stronger trade unions and employers’ associations engaged in social dialogue combined with coordinated wage bargaining on the sectoral level, and last but not least, redistributive policies aiming to achieve a more equal income distribution.

This article discusses the evolution of the total and social public expenditure in Uruguay during the 20th century. It analyzes the growth path of the social public expenditure and the extent up to which it could be preserved from the cyclical economic downturns and the fiscal constraints of the Public Sector. The paper finds a low long-run elasticity of public spending to GDP – leading to a slow growth of social public expenditure and a remarkable procyclical pattern of total and social public expenditure. It also shows that social spending, especially education expenditure, has often been used as an instrument to curb budget deficits. No distinctive «fiscal regimes» for the period could be identified.

The lack of fiscal discipline is a natural and pervasive implication of the perceived separation between the benefits from public spending and the taxes that individuals and interest groups receive and pay, respectively. The implication is that budget preparation, decision and execution must be constrained. The challenge is that the policymakers who need to be constrained are those who must decide the constraints. Two broad classes of solutions are possible: institutions that shape the budgetary process and quantitative rules that set limits. The mounting experience with both institutions and rules is disappointing, for reasons that are often complementary. Examining the reasons for this state of affairs, this article argues that institutions and rules ought to be combined and associated with advisory fiscal councils.

In the context of a stylised game theoretical framework of capital tax competition, we show that when repeated policy interactions are associated to a systematic punishment of the deviating policymaker, a co-ordinated outcome can be the solution to the non co-operative tax game. This result suggests that explicit forms of policy co-ordination, such as a centralised tax authority, could in fact be largely unnecessary.

Macroeconomic policy in Europe is now oriented to creating a stable environment in which the scope for output growth is enhanced. However, we maintain that not all dimensions of a stability-oriented policy framework appear to be in place. Fiscal policy rules and arrangements have been much discussed, but their design is not yet settled. The Single Market Programme has transformed competition in Europe, but its full implications for macroeconomic stability, especially its implications for financial market stability in combination with the Single Currency, have not yet been fully appreciated by policymakers. Future pension issues in the context of population ageing will pose a major challenge. We discuss the design of fiscal policy in (a Single Market) Europe, looking at fiscal pacts and the need for Europe-wide financial regulation in an integrated financial market as well as pension reform aspects.

Fiscal discipline is as much needed as monetary discipline. Many countries have attempted to counter the deficit bias by adopting fiscal rules that typically set a limit to their annual budget deficits. The record is not satisfactory; rules are either too lax or too tight and then ignored. This article suggests that the solution is to adopt the approach followed by inflation targeting central banks, with great success. Independent and accountable Fiscal Policy Committees, given the task of achieving debt targets and the authority to decide - or recommend - annual deficits, will be free from the deficit bias. This will allow them to exercise discretion in the short run while delivering debt sustainability in the long run.

Cet article étudie l’organisation monétaire socialement optimale dans le cadre d’un modèle à trois joueurs (banque centrale, gouvernement et secteur privé), et les raisons poussant la population à choisir un gouverneur dont l’arbitrage inflation-chômage diffère du sien. Il jette un regard critique sur les assimilations entre autonomie et conservatisme du banquier central d’une part, et entre indépendance de l’institution monétaire et absence de coordination des politiques d’autre part. Il est montré que les agents n’ont pas toujours intérêt à annoncer d’autres préférences que celles inscrites dans leur fonction de bien-être du moment que le gouvernement est «bienveillant», et que le décideur monétaire optimal peut être moins allergique à l’inflation que l’agent représentatif. L’existence d’un biais dépend plus généralement des rapports de force s’établissant entre les deux autorités, et du degré selon lequel les acteurs privés s’estiment correctement représentés par leurs élus. Il est soutenu que la coordination des politiques fiscale et monétaire est la configuration la plus pertinente pour expliquer la nomination d’un banquier «conservateur».

We show that accommodation policies may render efficient bargaining in the labour market unsustainable as a perfect Nash equilibrium of the infinitely repeated game. In fact, in the eyes of the labour market participants, efficient bargaining may be Pareto-dominated by the monopoly-union solution when the government places sufficiently high weight on employment targets.