Deflation Prevention and Cure * (2008)
central banks do? ” It subsequently evolved into the background paper for my Queen’s Prize Lecture at the London School of Economics, 19 May 2003, titled “Deflation: Causes, Prevention and...
Central banks and financial crises (2008)
The paper draws lessons from the experience of the past year for the conduct of central banks in the pursuit of macroeconomic and financial stability. Macroeconomic stability is defined as either...
Why the United Kingdom should join the eurozone (2008)
The message of this paper is that the global financial crisis that started in August 2007 provides another powerful and sufficient argument for the United Kingdom to join the EMU and adopt the euro...
The paper reviews the arguments for and against monetary union among the six members of the Gulf Cooperation Council - the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the...
The paper reviews the arguments for and against monetary union among the six members of the Gulf Cooperation Council - the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the...
The paper reviews the arguments for and against monetary union among the six members of the Gulf Cooperation Council - the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the...
The Effects Of, Willem H. Buiter
this paper considers two classes of rules, with two subcases in each class. The first class of rules is a simple Taylor rule for the short nominal rate of interest. The nominal rate depends on a...
Notes on `A Code for Fiscal Stability' (2007)
Willem H. Buiter, Willem H. Buiter
This note comments on two central issues for fiscal policy design in the UK, highlighted in the recent `Code for Fiscal Stability' proposed by the new Labour government. The first concerns the...
Buiter, Willem H., Sibert, Anne C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only …financial asset and provide the...
Buiter, Willem H., Sibert, Anne C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only …financial asset and provide the...
Buiter, Willem H., Sibert, Anne C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only …financial asset and provide the...
Governments through the ages have appropriated resources through the monopoly of the ‘coinage’. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to...
Governments through the ages have appropriated resources through the monopoly of the ‘coinage’. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to...
Governments through the ages have appropriated resources through the monopoly of the ‘coinage’. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to...
In this paper I analyse four different but related concepts, each of which highlights some aspect of the way in which the state acquires command over real resources through its ability to issue fiat...
In this paper I analyse four different but related concepts, each of which highlights some aspect of the way in which the state acquires command over real resources through its ability to issue fiat...
The paper discusses some fundamental problems in monetary economics associated with the determination and role of the numéraire. The issues are introduced by formalising a proposal, attributed to...
The paper discusses some fundamental problems in monetary economics associated with the determination and role of the numéraire. The issues are introduced by formalising a proposal, attributed to...
It’s a long way to Copenhagen?. CEPS Policy Briefs No. 96, 1 March 2006 (2006)
Turkey, which officially started negotiations for EU membership in October 2005, currently has a lower per capita income than that of any of the EU-25 countries – about at the level of Romania and...
Buiter, Willem H., Panigirtzoglou, Nikolaos
Despite the zero lower bound on the short nominal interest rate in Japan having become a binding constraint, conventional monetary policy in Japan, in the form of generalised open market purchases of...
Buiter, Willem H., Panigirtzoglou, Nikolaos
Despite the zero lower bound on the short nominal interest rate in Japan having become a binding constraint, conventional monetary policy in Japan, in the form of generalised open market purchases of...
Buiter, Willem H., Panigirtzoglou, Nikolaos
Despite the zero lower bound on the short nominal interest rate in Japan having become a binding constraint, conventional monetary policy in Japan, in the form of generalised open market purchases of...
Monetary theory and policy are part of intertemporal public finance. The two ghosts are the liquidity trap and the real balance effect. The eccentricities are negative nominal interest rates and the...
This 2003 Institute for Fiscal Studies Lecture addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability and Growth Pact for...
This 2003 Institute for Fiscal Studies Lecture addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability and Growth Pact for...
This 2003 Institute for Fiscal Studies Lecture addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability and Growth Pact for...
Buiter, Willem H., Sibert, Anne C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only financial asset and provide the relevant...
Buiter, Willem H., Sibert, Anne C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only financial asset and provide the relevant...
Buiter, Willem H., Sibert, Anne C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only financial asset and provide the relevant...
James Tobin : an appreciation of his contribution to economics (2003)
Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin’s...
James Tobin : an appreciation of his contribution to economics (2003)
Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin’s...
James Tobin : an appreciation of his contribution to economics (2003)
Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin’s...
An economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest. A necessary condition for this is that the short nominal interest rate is...
An economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest. A necessary condition for this is that the short nominal interest rate is...
An economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest. A necessary condition for this is that the short nominal interest rate is...
Buiter, Willem H., Grafe, Clemens
Documents prepared to inform the assessment of the five economic tests.
views and opinions of the European Bank for Reconstruction and Development. (2003)
∗ The views and opinions expressed are those of the author. They do not reflect the
Ten Commandments for a Fiscal Rule in the E(M)U (2003)
Fiscal rules in a monetary union should (1) be simple; (2) ensure the solvency of the state; (3) relate to the consolidated general government and central bank; (4) be neutral as regards the size of...
Anchor, float or abandon ship: exchange rate regimes for the accession countries (2002)
Buiter, Willem H., Grafe, Clemens
The paper considers alternative exchange rate regimes for the East European accession candidates, both prior to EU accession and following EU accession but prior to EMU membership. We conclude that,...
Why Britain shoud join the euro (2002)
Layard, Richard, Buiter, Willem H., Huhne, Christopher, Hutton, Will, Kenen, Peter B., Turner, Adair
Excessive deficits: sense and nonsense in the treaty of Maastricht (2001)
Buiter, Willem H., Corsetti, Giancarlo, Roubini, Nouriel
This collection brings together both classic articles which have laid the foundations for the theory of optimum currency and the resulting empirical literature. Articles are presented in sections on...
Monetary misconceptions (2000)
The paper identifies a number of misconceptions about the monetary policy process and the monetary transmission mechanism in the UK. Among the misconceptions about the process are the alleged lack of...
Monetary misconceptions (2000)
The paper identifies a number of misconceptions about the monetary policy process and the monetary transmission mechanism in the UK. Among the misconceptions about the process are the alleged lack of...
Optimal currency areas: Scottish Economic Society/Royal Bank of Scotland annual lecture, 1999 (2000)
Microeconomic efficiency and market transparency argue in favour of UK membership in EMU and for Scotland''s membership in the UK monetary union and also in EMU. UK seigniorage (government revenues...
Microeconomic efficiency and market transparency argue in favour of UK membership in EMU and for Scotland''s membership in the UK monetary union and also in EMU. UK seigniorage (government revenues...
The fallacy of the fiscal theory of the price level (2000)
It is not common for an entire scholarly literature to be based on a fallacy, that is, ''on faulty reasoning; misleading or unsound argument''. The ''fiscal theory of the price level'', recently...
The fallacy of the fiscal theory of the price level (2000)
It is not common for an entire scholarly literature to be based on a fallacy, that is, ''on faulty reasoning; misleading or unsound argument''. The ''fiscal theory of the price level'', recently...
Layard, Richard, Buiter, Willem H., Currie, David, Huhne, Christopher, Hutton, Will, Kenen, Peter, ...
2 IS ICELAND AN OPTIMAL CURRENCY AREA? by (2000)
Willem H. Buiter, Willem H. Buiter
The paper considers the pros and cons for Iceland adopting the euro as legal tender. The current Icelandic monetary arrangements are contrasted both with a unilateral adoption of the euro and with a...
The Fallacy of the Fiscal Theory of the Price Level, Again (2000)
Willem H. Buiter, David Begg, Alec Chrystal, John Cochrane, Jon Faust, Dale Henderson, ...
This paper argues that the `fiscal theory or the price level' (FTPL), developed by Woodford, Cochrane, Sims and others, is a fallacy. The source of the fallacy is an elementary economic...
UDROP: a contribution to the new international financial architecture (1999)
Buiter, Willem H., Sibert, Anne C.
We propose a Universal Debt Rollover Option with a Penalty (UDROP) to prevent liquidity crises for foreign-currency debt. All foreign-currency liabilities should have an attached option entitling the...
The article contains a detailed critique of the common currency arrangements of the Economic and Monetary Union, embodied in the laws and emerging procedural arrangements that govern the actions of...
UDROP: a small contribution to the international financial architecture (1999)
Buiter, Willem H., Sibert, Anne
The purpose of the UDROP proposal is to prevent debt rollover crises for foreign-currency-enominated debt instruments. For such liabilities, there is no international analogue to the domestic lender...
UDROP: a small contribution to the international financial architecture (1999)
Buiter, Willem H., Sibert, Anne
The purpose of the UDROP proposal is to prevent debt rollover crises for foreign-currency-enominated debt instruments. For such liabilities, there is no international analogue to the domestic lender...
The paper contains a detailed critique of the common currency arrangements of the Economic and Monetary Union, embodied in the laws and emerging procedural arrangements that govern the actions of its...
The paper contains a detailed critique of the common currency arrangements of the Economic and Monetary Union, embodied in the laws and emerging procedural arrangements that govern the actions of its...
Bank Of England, Willem H. Buiter, Willem H. Buiter
Microeconomic efficiency and market transparency argue in favour of UKmembership in EMU and for Scotland's membership in the UK monetary union and also in EMU. UK seigniorage (government...
Buiter, Willem H., Lago, R., Rey, H.
This paper analyses the theoretical arguments and empirical evidence linking enterprise performance in transition economies to the macroeconomic environment. Macroeconomic instability is traced to...
Aspects of fiscal performance in some transition economies under fund-supported programs (1997)
This paper contains a selective review of some of the key fiscal issues faced by transition economies. The twelve countries that provide the empirical background for this study have all been under...
Buiter, Willem H., Lago, R., Rey, H.
This paper analyses the theoretical arguments and empirical evidence linking enterprise performance in transition economies to the macroeconomic environment. Macroeconomic instability is traced to...
Aspects of fiscal performance in some transition economies under fund-supported programs (1997)
This paper contains a selective review of some of the key fiscal issues faced by transition economies. The twelve countries that provide the empirical background for this study have all been under...
Promoting an effective market economy in a changing world (1997)
Buiter, Willem H., Lago, Richard, Stern, Nicholas
In this paper we examine the main challenges in promoting an effective market economy. While the paper ranges widely across the spectrum of economic institutions and policies, the central theme is...
Interpreting the ERM crisis: country-specific and systemic issues (1997)
Buiter, Willem H., Corsetti, Giancarlo M., Pesenti, Paolo A.
Most interpretations of the Exchange Rate Mechanism crisis in 1992-93 ignore the key role played by structural policy spillovers among European countries, and overlook the effects of coordination (or...
Buiter, Willem H., Lagos, R., Rey, H.
This paper takes a systematic look at the portfolio choice problem faced by Investment Banks or Funds investing in transition economies. We relate the performance of projects in the transition...
Interpreting the ERM crisis: country-specific and systemic issues (1997)
Buiter, Willem H., Corsetti, Giancarlo M., Pesenti, Paolo A.
Most interpretations of the Exchange Rate Mechanism crisis in 1992-93 ignore the key role played by structural policy spillovers among European countries, and overlook the effects of coordination (or...
Buiter, Willem H., Lagos, R., Rey, H.
This paper takes a systematic look at the portfolio choice problem faced by Investment Banks or Funds investing in transition economies. We relate the performance of projects in the transition...
Promoting an effective market economy in a changing world (1996)
Buiter, Willem H., Lago, Richard, Stern, Nicholas
In this paper we examine the main challenges in promoting an effective market economy. While the paper ranges widely across the spectrum of economic institutions and policies, the central theme is...
Promoting an effective market economy in a changing world (1996)
Buiter, Willem H., Lago, Richard, Stern, Nicholas
In this paper we examine the main challenges in promoting an effective market economy. While the paper ranges widely across the spectrum of economic institutions and policies, the central theme is...
Macroeconomic policy during a transition to monetary union (1995)
The main conclusions of the paper are the following: - In order to minimize switching costs, the name of the new EU currency should be the D-mark - Differential national requirements for seigniorage...
Macroeconomic policy during a transition to monetary union (1995)
The main conclusions of the paper are the following: - In order to minimize switching costs, the name of the new EU currency should be the D-mark - Differential national requirements for seigniorage...
This study updates and extends to the period 88/89-92-93 our earlier analysis of the public finances of India. With the collapse of the communist regimes in the former Soviet Union and Eastern...
A center-periphery model of monetary coordination and exchange rate crises (1995)
Buiter, Willem H., Corsetti, G., Pesenti, P.
The paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an...
This study updates and extends to the period 88/89-92-93 our earlier analysis of the public finances of India. With the collapse of the communist regimes in the former Soviet Union and Eastern...
A center-periphery model of monetary coordination and exchange rate crises (1995)
Buiter, Willem H., Corsetti, G., Pesenti, P.
The paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an...
Buiter, Willem H., Kletzer, K.
This paper considers the effect of fiscal and financial policy on economic growth in open and closed economies, when human capital formation by young households is constrained by the illiquidity of...
Buiter, Willem H., Kletzer, K.
This paper considers the effect of fiscal and financial policy on economic growth in open and closed economies, when human capital formation by young households is constrained by the illiquidity of...
Are generational accounts informative about the effect of the budget on the intergenerational distribution of resources (when augmented with generation-specific propensities to consume out of...
Are generational accounts informative about the effect of the budget on the intergenerational distribution of resources (when augmented with generation-specific propensities to consume out of...
Taxation, human capital, and uncertainty (1980)
Jonathan Eaton, Harvey S. Rosen, Willem H. Buiter, Yoram Weiss For, Abs Tract, I. Introuctio
useful suggestions. Part of Rosen's work on this project was completed while
Transition Issues for the European Monetary Union
Buiter, Willem H, Sibert, Anne
If Stage Three of EMU starts on 1 January 1999, transition issues remain on two time scales. Until 1 July 2002, national currencies and the euro coexist as legal tender. We argue that intra-EMU...
Ponzi Finance, Government Solvency and the Redundancy or Usefulness of Public Debt
Willem H. Buiter, K.M. Kletzer
We study how the government's ability to borrow depends on its capacity to tax. Using a two-period OLG growth model, we establish the following. When lump-sum taxes are unrestricted, Ponzi finance is...
Buiter, Willem H, Sibert, Anne
Market interest rates on sovereign debt issued by the 12 Eurozone national governments differ very little from each other, despite the credit ratings of these governments ranging from triple A to...
The 'Sense and Nonsense of Maastricht' Revisited: What Have We Learnt About Stabilization In EMU?
This paper revisits the paper 'Excessive deficits: sense and nonsense in the Treaty of Maastricht', co-authored with Giancarlo Corsetti and Nouriel Roubini and published during 2003 in Economic...
Allocative and Stabilisation Aspects of Budgetary and Financial Policy
The paper deals with the principles that should govern the design of budgetary and financial policy. The analytical divorce between stabilisation policy, which concerns deviations from full...
Measuring Aspects of Fiscal and Financial Policy
The paper develops a forward-looking comprehensive accounting framework for the public sector. By integrating the public sector budget constraint forward in time the government's present value budget...
This paper surveys some recent developments in policy evaluation and design in continuous time linear rational expectations models. Much recent work in macroeconomics and open economy macroeconomics...
Fiscal Policy in Open, Interdependent Economies
The paper studies the effects of alternative financing policies in the open economy. There is a non-trivial role for financing policy because of the failure of first-order debt neutrality due to...
International Monetary Policy to Promote Economic Recovery
The paper studies the design of efficient anti-inflationary policies in a two-country interdependent economic system. A number of alternative specifications of the price formation process are...
Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies
The paper uses a small analytical model of two regions, the United States and the Rest of the Industrial World, to analyze three topical issues concerning international economic interdependence and...
Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions
The paper presents a non-technical survey of some of the issues involved in the design of stabilization policy in developing countries with special emphasis on policy responses to external shocks....
Borrowing to Defend the Exchange Rate and the Timing and Magnitude of Speculative Attacks
The paper extends the recent literature on the collapse of managed exchange-rate regimes by allowing explicitly for the government budget constraint and the interest cost of servicing the public...
A Gold Standard Isn't Viable Unless Supported by Sufficiently Flexible Monetary and Fiscal Policy
The paper studies an idealized gold standard in a two-country setting. Unless national policies for domestic credit expansion (dce) are flexible enough to offset the effect of money demand shocks on...
Granger Causality and Policy Ineffectiveness: A Rejoinder
In an earlier paper "Granger-causality and Policy Effectiveness" Economica (1984), I showed that for a policy instrument x to Granger-cause some target variable y it is not necessary for x to be...
Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy
The paper considers the response of a small, open dependent economy to a variety of fiscal and financial shocks. It also examines the influence of alternative budget-balancing rules on the response...
The paper first reviews the budget identities of the fiscal and monetary authorities and the solvency constraint or present value budget constraint of the consolidated public sector, for both closed...
The paper provides an account of the current global economic situation, outlook and policy options. Medium-term prospects are mediocre and fraught with considerable downside risk. Fiscal and monetary...
Can Public Spending Cuts be Inflationary?
The paper uses a 'demand for seigniorage revenue' and 'supply of seigniorage revenue' approach to determine the consequences of cuts in public spending for the rate of inflation. Monetary financing...
The paper analyzes the role of fiscal policy in the restoration of internal and external macroeconomic equilibrium and in achieving structural adjustment, i.e. major changes in the patterns of...
Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap
The Paper provides a formalization of the monetary economics folk proposition that government fiat money is an asset of the holder (the private sector) but not a liability of the issuer (the state)....
Buiter, Willem H, Sibert, Anne
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only financial asset and provide the relevant...
The fallacy of the fiscal theory of the price level, again
This paper argues that the 'fiscal theory of the price level' (FTPL) is fallacious. The source of the fallacy is an elementary economic misspecification. The FTPL denies a fundamental property of any...
The paper studies the inflation rate associated with optimal monetary policy in a standard suite of DSGE models, when fiscal policy is either unrestricted optimal or restricted but supportive of...
Buiter, Willem H, Patel, Urjit R.
Capital formation is a key driver of the growth of potential output. With continuing widespread capital controls and persistently small inward FDI the volume of capital formation in India is...
Ten Commandments for a Fiscal Rule in the E(M)U
Fiscal rules in a monetary union should (1) be simple; (2) ensure the solvency of the state; (3) relate to the consolidated general government and central bank; (4) be neutral as regards the size of...
Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap
The paper provides a formalisation of the monetary folk proposition that fiat base money is an asset of the holder but not a liability of the issuer. The issuance of irredeemable fiat base money can...
Monetary theory and policy are part of intertemporal public finance. The two "ghosts" are the liquidity trap and the real balance effect. The "eccentricities" are negative nominal interest rates and...
Cross-Border Tax Externalities: Are Budget Deficits too Small?
Buiter, Willem H, Sibert, Anne
In a dynamic optimizing model with costly tax collection, a tax cut by one nation creates positive externalities for the rest of the world if initial public debt stocks are positive. By reducing tax...
Flexible inflation targeting cannot be rationalised using conventional welfare economic criteria, except in a single, practically uninteresting special case. New-Keynesian DSGE models imply that...
Liquidity traps: how to avoid them and how to escape them
Willem H Buiter, Nikolaos Panigirtzoglou
An economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest. A necessary condition for this is that the short nominal interest rate is...
Fiscal Policy Interdependence and Efficiency
Buiter, Willem H, Kletzer, Kenneth
This paper uses a two-country overlapping generations model to study the international transmission of fiscal policy among open interdependent economies under free international capital mobility....
The Welfare Economics of Cooperative and Uncooperative Fiscal Policy
Buiter, Willem H, Kletzer, Kenneth
In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences)...
Reflections on the Fiscal Implications of a Common Currency
Buiter, Willem H, Kletzer, Kenneth
This paper studies the likely consequences of monetary unification among the EC members for the conduct of fiscal policy in the EC countries (and by an emerging Federal European Fiscal Authority)....
Rational Speculative Bubbles in an Exchange Rate Target Zone
Buiter, Willem H, Pesenti, Paolo
The recent theory of exchange rate dynamics within a target zone holds that exchange rates under a currency band are less responsive to fundamental shocks than exchange rates under a free float,...
The behavior of several stochastic dynamic rational expectations models is studied when policy behavior can be described by a linear rule. Four policy components are distinguished: a current response...
Time Preference and International Lending and Borrowing in an Overlapping-Generations Model
Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments...
The paper discusses some fundamental problems in monetary economics associated with the determination and role of the numéraire. The issues are introduced by formalising a proposal, attributed to...
The Roles of Monetary, Financial and Fiscal Policy with Rational Expectations
The setup of the paper is as follows: Section I presents a fairly standard, small deterministic macromodel with a number of classical features. All markets clear instantaneously, there is no money...
Deficits, Crowding Out and Inflation: The Simple Analytics
The paper studies the relationship between public sector financial deficits, crowding-out of public sector capital formation and inflation in a number of small, classical macroeconomic models. This...
Governments through the ages have appropriated real resources through the monopoly of the ‘coinage’. In modern fiat money economies, the monopoly of the issue of legal tender is generally...
International Balance of Payments Financing and Adjustment
Willem H. Buiter, Jonathan Eaton
This paper explores some implications of the use of national currencies as international reserves. First, a closed economy overlapping-generations model is developed to derive time-consistent tax and...
The Role of Economic Policy after the New Classical Macroeconomics
The paper considers the implications of the rational expectations New Classical Macroeconomics revolution for the 'rules versus discretion' debate. The following issues are covered: 1) The...
Monetary Policy and Indernational Competitiveness
Willem H. Buiter, Marcus H. Miller
A model of Dornbusch is adapted to analyze the consequences for output and competitiveness of certain aspects of the U.K. government's medium term financial strategy and some other policy actions....
The paper addresses two issues that arise in estimation of testing of the real effects of anticipated and unanticipated money. First it is shown that identification of the effects of unanticipated...
Oil, Disinflation, and Export Competitiveness: A Model of the "Dutch Disease"
Willem H. Buiter, Douglas D. Purvis
This paper examines three possible sources of "de-industrialization" in an open economy: monetary disinflation, an increase in the international price of oil, and a 'domestic oil discovery. The...
Costs and Benefits of an Anti-Inflationary Policy: Questions and Issues
Willem H. Buiter, Marcus H. Miller
This paper analyses how the output or unemployment cost of achieving a sustainable reduction in the rate of inflation depends on the structure of the wage-price process and how the "sacrifice ratio"...
Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation
Willem H. Buiter, Marcus H. Miller
Implementing a 'gradualist' policy of monetary contraction, in an open economy with a freely floating exchange rate but with nominal inertia in domestic labor costs, can lead to prompt and...
Comment on T. J. Sargent and N. Wallace: "Some Unpleasant Monetarist Arithmetic"
Sargent and Wallace (S-W) show that, even when inflation is prima facie a strictly monetary phenomenon -- prices are flexible, markets clear and velocity is constant -- inflation is, in the long run,...
Measuring Aspects of Fiscal and Financial Policy
The paper develops a forward-looking comprehensive accounting framework for the public sector.By integrating the public sector budget constraint forward in time the government's present value budget...
The paper first reviews the budget identities of the fiscal and monetary authorities and the solvency constraint or present value budget-constraint of the consolidated public sector, for closed and...
Death, Population Growth, Productivity Growth and Debt Neutrality
Debt neutrality is said to occur if, given a program for public spending on current goods and services over time, the real equilibrium of the economy (private consumption, investment, relative...
Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy
The paper considers the response of a small, open dependent economy to a variety of fiscal and financial shocks as well as the influence of alternative budget balancing rules on the response of the...
International Monetary Policy to Promote Economic Recovery
The paper studies the design of efficient anti-inflationary policies in a two-country interdependent economic system. A number of alternative specifications of the price formation process are...
Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies
The paper uses a small analytical two-region (the United States and the Rest of the Industrial World) model, to analyze three issues Concerning international economic interdependence and...
The paper analyses the role of fiscal policy in the restoration of internal and external macroeconomic equilibrium and in achieving structural adjustment i.e. major changes in the patterns of...
A "Gold Standard" Isn't Viable Unless Supported by Sufficiently FlexibleMonetary and Fiscal Policy
The paper studies an idealized gold standard in a two-country setting. Without flexible national domestic credit expansion (dce)policies which offset the effect of money demand shocks on...
For an economic system not to exhibit debt neutrality it must be true that changes in the time profile of lump-sum taxes redistributes resources between heterogeneous consumers. OLD models have age...
Debt, Deficits and Inflation: An Application to the Public Finances of India
Willem H. Buiter, Urjit R. Patel
The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt-GNP ratio without any changes in the primary deficit. The...
The "Gold Standard Paradox" and its Resolution
Willem H. Buiter, Vittorio U. Grilli
This paper analyzes Krugman's contention that there is a "gold standard paradox" in the speculative attack literature. The paradox occurs if a country's currency appreciates after it runs out of gold...
Government Solvency, Ponzi Finance and the Redundancy and Usefulness of Public Debt
Willem H. Buiter, Kenneth M. Kletzer
We investigate how the ability of the government to depart from budget balance and issue debt expands the set of equilibria that can be supported using lump-sum tax-transfer instruments. We show how...
Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions
The paper presents a non-technical survey of some of the issues involved in the design of stabilization policy 10 developng countries with special emphasis on policy responses to external shocks....
Monetary and Fiscal Policy with Flexible Exchange Rates
William H. Branson, Willem H. Buiter
If price decisions are taken neither continuously nor in perfect synchronization, the process of adjustment of all prices to a new nominal level will imply temporary movements in relative prices. It...
Governments through the ages have appropriated real resources through the monopoly of the 'coinage'. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to...
Promoting an Effective Market Economy in a Changing World
Buiter, Willem H, Lago, Ricardo, Stern, Nicholas (Sir)
In this paper we examine the main challenges in promoting an effective market economy. While the paper ranges widely across the spectrum of economic institutions and policies, the central theme is...
Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation
Buiter, Willem H, Miller, Marcus
The proposition that under a floating exchange rate regime restrictive monetary policy can lead to substantial "overshooting" of the nominal and real exchange rate is now accepted fairly widely. The...
Policy Decentralization and Exchange Rate Management in Interdependent Economies
Willem H. Buiter, Jonathan Eaton
The paper provides a theoretical framework for analyzing policy formation among independent authorities operating in an interdependent environment. This is then applied to the analysis of optimal...
Changing the Rules: Economic Consequences of the Thatcher Regime
Willem H. Buiter, Marcus Miller
macroeconomics, Thatcher
Willem H. Buiter, Clemens Grafe
The paper considers the implications for the EU accession candidates of Central and Eastern Europe of the fiscal-financial constraints imposed by the Stability and Growth Pact and the Maastricht...
Monetary union and macroeconomic stabilization
Willem H. Buiter, Kenneth M. Kletzer
European Monetary System (Organization) ; European Economic Community ; Foreign exchange rates
James Tobin: An Appreciation of his Contribution to Economics
Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin's influence...
Willem H. Buiter, Nikolaos Panigirtzoglou
The paper considers two small analytical models, one Old-Keynesian, the other New-Keynesian, possessing equilibria where nominal interest rates at all maturities can be stuck at their zero lower...
The Fiscal Theory Of The Price Level: A Critique
This paper argues that the "fiscal theory of the price level" (FTPL) has feet of clay. The source of the problem is a fundamental "economic" misspecification. The FTPL confuses two key building...
Death, Birth, Productivity Growth and Debt Neutrality.
This paper reconsiders the necessary and sufficient conditions for debt neutrality. There is debt neutrality if, given a pro gram for public expenditure on current goods and services over time, the...
This paper addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability & Growth Pact for fiscal-financial sustainability and macroeconomic...
Generational Accounts, Aggregate Saving and Intergenerational Distribution.
Are generational accounts informative about the effect of the budget on the intergenerational distribution of resources and on aggregate saving? First, the usefulness of generational accounts lives...
Permanent International Productivity Growth Differentials in an Integrated Global Economy.
Buiter, Willem H, Kletzer, Kenneth M
The paper analyzes the role of differences in household behavior as a source of persistent and even permanent differences between national or regional productivity growth rates when they are constant...
UDROP: A Contribution to the New International Financial Architecture.
Buiter, Willem H, Sibert, Anne C
We propose a Universal Debt Rollover Option with a Penalty (UDROP) to prevent liquidity crises for foreign-currency debt. All foreign-currency liabilities should have an attached option entitling the...
Lessons from the 2007 Financial Crisis
The paper studies the causes of the current financial crisis and considers proposals for mitigation and prevention of future crises. The crisis is was the product of a ‘perfect storm’ bringing...
Changing the Rules: Economic Consequences of the Thatcher Regime
Willem H. Buiter, Marcus Miller
macroeconomics, Thatcher
The Fallacy of the Fiscal Theory of the Price Level, Again
The Fiscal Theory of the Price Level (FTPL) rejects the fundamental 'Ricardian' proposition, that the government budget constraint must hold identically, that is for all admissible values of the...
The paper studies the inflation rate associated with optimal monetary and fiscal policy in a number of standard dynamic stochastic general equilibrium models with nominal price rigidities. While the...
BUITER, WILLEM H., SIBERT, ANNE C.
In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only financial asset and provide the relevant...
The paper reviews the arguments for and against monetary union among the six members of the Gulf Cooperation Council - the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the...
Central Banking and the Choice of Currency Regime in Accession Countries
Willem H. Buiter, Clemens Grafe, Morten Balling
The subject matter of this paper is the design of appropriate Central Banking arrangements and exchange rate regimes for those former centrally planned Central and East European countries that are...
The 'Sense and Nonsense of Maastricht' Revisited: What Have we Learnt about Stabilization in EMU?
This retrospective argues that old criticisms of the Stability and Growth Pact survive intact, but emphasizes two further features. First, the Pact imposes constraints on national fiscal autonomy,...
The Economic Case for Monetary Union in the European Union.
Differential requirements for seigniorage provide a weak case for retaining monetary independence. As regards adjustment to asymmetric shocks, nominal exchange rate flexibility is at best a limited...
A Viable Gold Standard Requires Flexible Monetary and Fiscal Policy.
This paper studies an idealized gold standard in a two-country setting. Without flexible national domestic credit expansion policies, the standard collapses in finite time through a speculative...
A Gold Standard Isn't Viable Unless Supported by Sufficiently Flexible Monetary and Fiscal Policy
The paper studies an idealized gold standard in a two-country setting. Unless national policies for domestic credit expansion (dce) are flexible enough to offset the effect of money demand shocks on...
Can Public Spending Cuts be Inflationary?
The paper uses a 'demand for seigniorage revenue' and 'supply of seigniorage revenue' approach to determine the consequences of cuts in public spending for the rate of inflation. Monetary financing...
Aspects of Fiscal Performance in some Transition Economies under Fund-supported Programs
This paper contains a selective review of some of the key fiscal issues faced by transition economies. The twelve countries that provide the empirical background for this study have all been under...
Buiter, Willem H, Lago, Ricardo, Rey, Hélène
This paper takes a systematic look at the portfolio choice problem faced by investment banks or funds investing in transition economies. We relate the performance of projects in the transition...
Notes on 'A Code for Fiscal Stability'
This note comments on two central issues for fiscal policy design in the United Kingdom, highlighted in the recent ‘Code for Fiscal Stability’ proposed by the new Labour government. The first...
The EMU and the NAMU: What is the Case for North American Monetary Union?
The paper considers the pros and cons for Canada of monetary union between Canada and the U.S. The current Canadian monetary arrangements, a flexible exchange rate and an inflation target, are...
Monetary Misconceptions: New and Old Paradigmata and Other Sad Tales
Several recent studies imply that the response of national saving to fiscal policy is non-monotonic. In this paper, we use two data sets to search for the circumstances in which such non-monotonic...
Buiter, Willem H, Sibert, Anne
We analyse deflationary bubbles in a model where money is the only financial asset. We show that such bubbles are consistent with the household’s transversality condition if and only if the nominal...
The EMU and the NAMU: What is the Case for North American Monetary Union?
The paper considers the pros and cons for Canada of monetary union between Canada and the United States. The current Canadian monetary arrangements, a flexible exchange rate and an inflation target,...
Allocative and Stabilisation Aspects of Budgetary and Financial Policy
The Paper deals with the principles that should govern the design of budgetary and financial policy. The analytical divorce between stabilisation policy, which concerns deviations from full...
Measuring Aspects of Fiscal and Financial Policy
The paper develops a forward-looking comprehensive accounting framework for the public sector. By integrating the public sector budget constraint forward in time the government's present value budget...
This paper surveys some recent developments in policy evaluation and design in continuous time linear rational expectations models. Much recent work in macroeconomics and open economy macroeconomics...
Fiscal Policy in Open, Interdependent Economies
The paper studies the effects of alternative financing policies in the open economy. There is a non-trivial role for financing policy because of the failure of first-order debt neutrality due to...
International Monetary Policy to Promote Economic Recovery
The paper studies the design of efficient anti-inflationary policies in a two-country interdependent economic system. A number of alternative specifications of the price formation process are...
Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies
The paper uses a small analytical model of two regions, the United States and the Rest of the Industrial World, to analyze three topical issues concerning international economic interdependence and...
Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions
The paper presents a non-technical survey of some of the issues involved in the design of stabilization policy in developing countries with special emphasis on policy responses to external shocks....
Borrowing to Defend the Exchange Rate and the Timing and Magnitude of Speculative Attacks
The paper extends the recent literature on the collapse of managed exchange-rate regimes by allowing explicitly for the government budget constraint and the interest cost of servicing the public...
Granger Causality and Policy Ineffectiveness: A Rejoinder
In an earlier paper "Granger-causality and Policy Effectiveness" Economica (1984), I showed that for a policy instrument x to Granger-cause some target variable y it is not necessary for x to be...
Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy
The paper considers the response of a small, open dependent economy to a variety of fiscal and financial shocks. It also examines the influence of alternative budget-balancing rules on the response...
The paper first reviews the budget identities of the fiscal and monetary authorities and the solvency constraint or present value budget constraint of the consolidated public sector, for both closed...
The paper provides an account of the current global economic situation, outlook and policy options. Medium-term prospects are mediocre and fraught with considerable downside risk. Fiscal and monetary...
The paper analyzes the role of fiscal policy in the restoration of internal and external macroeconomic equilibrium and in achieving structural adjustment, i.e. major changes in the patterns of...
The `Gold Standard Paradox' and Its Resolution
Buiter, Willem H, Grilli, Vittorio
This paper analyses Krugman's contention that there is a `gold standard paradox' in the speculative attack literature. The paradox occurs if a country's currency appreciates after it runs out of gold...
Debt, Deficits and Inflation: An Application to the Public Finance of India
The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt/GNP ratio without any changes in the primary deficit. The...
Buiter, Willem H, Kletzer, Kenneth
The paper develops a two-country endogenous growth model to investigate possible causes for the existence and persistence of productivity growth differentials between nations, even though these...
Saving and Endogenous Growth: A Survey of Theory and Policy
The paper surveys and extends recent results on the effect of changes in government fiscal and financial policy, and in private savings behaviour, on economic growth. Private saving behaviour is...
Should We Worry About the Fiscal Numerology of Maastricht?
The paper reviews and evaluates in a non-technical manner the economic and political arguments for and against the two fiscal convergence criteria written into the Treaty of Maastricht and its...
Government Solvency, Ponzi Finance and the Redundancy and Usefulness of Public Debt
Buiter, Willem H, Kletzer, Kenneth
We investigate how the ability of the government to depart from budget balance and issue debt expands the set of equilibria that can be supported using lump-sum tax-transfer instruments. We show how...
`Excessive Deficits': Sense and Nonsense in the Treaty of Maastricht
Buiter, Willem H, Corsetti, Giancarlo, Roubini, Nouriel
In this paper we evaluate internationally agreed limits on public sector debt and deficits, such as those agreed by the EC countries in the Treaty of Maastricht as preconditions for membership in a...
Public Debt in the USA: How Much, How Bad and Who Pays?
In terms of the ratio of its public debt and public deficit to GDP the United States lies in the middle of the pack of industrial countries. The period since 1980 is the only peacetime period outside...
Indian Public Finance in the 1990s: Challenges and Prospects
This study updates and extends to the period 1988/9--1992/3 our earlier analysis of the public finances of India. The foreign exchange crisis of early 1991 forced the government to recognize the...
Capital Mobility, Fiscal Policy and Growth Under Self-Financing of Human Capital Formation
Buiter, Willem H, Kletzer, Kenneth
This paper considers the effects of fiscal and financial policy on economic growth in open and closed economies, when human capital formation by young households is constrained by the illiquidity of...
A Centre-Periphery Model of Monetary Coordination and Exchange Rate Crises
Buiter, Willem H, Corsetti, Giancarlo, Pesenti, Paolo
The paper analyses the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone periphery countries that use an exchange rate peg as an...
Macroeconomic Policy During a Transition to Monetary Union
The main conclusions of this paper are the following. In order to minimize switching costs, the name of the new EU currency should be the Deutschmark. Differential national requirements for...
Interpreting the ERM Crisis: Country-Specific and Systemic Issues
Buiter, Willem H, Corsetti, Giancarlo, Pesenti, Paolo
Most interpretations of the Exchange Rate Mechanism crisis of 1992/3 ignore the key role played by structural policy spillovers among European countries, and overlook the effects of coordination (or...
Enterprises in Transition: Macroeconomic Influences on Enterprise Decision-making and Performance
Buiter, Willem H, Lago, Ricardo, Rey, Hélène
The paper analyses the theoretical arguments and empirical evidence linking enterprise performance in transition economies to the macroeconomic environment. Macroeconomic instability is traced to the...
The paper establishes the following: First, money is neutral even if there is a non-zero stock of non-monetary nominal public debt, because the government adjusts real taxes to satisfy its...
UDROP: A Small Contribution to the New International Financial Architecture
Buiter, Willem H, Sibert, Anne
The purpose of the UDROP proposal is to prevent debt rollover crises for foreign-currency-denominated debt instruments. For such liabilities, there is no international analogue to the domestic lender...
Liquidity Traps: How to Avoid Them and How to Escape Them
Buiter, Willem H, Panigirtzoglou, Nikolaos
The paper considers ways of avoiding a liquidity trap and ways of getting out of one. Unless lower short nominal interest rates are associated with significantly lower interest volatility, a lower...
The Fallacy of the Fiscal Theory of the Price Level
It is not common for an entire scholarly literature to be based on a fallacy, that is, "on faulty reasoning; misleading or unsound argument". The 'fiscal theory of the price level', recently...
Optimal Currency Areas: Why Does The Exchange Rate Regime Matter?
Microeconomic efficiency and market transparency argue in favour of UK membership in EMU and for Scotland's membership in the UK monetary union and also in EMU. UK seigniorage (government revenues...
The Liquidity Trap in an Open Economy
The Paper studies the implications of the zero lower bound on the short nominal rate of interest for the conduct of monetary policy in a small open economy with a floating exchange rate and perfect...
No Pain, No Gain? The Simple Analytics of Efficient Disinflation in Open Economies
Buiter, Willem H, Grafe, Clemens
The Paper studies the design of efficient disinflation programmes in open economies using the sacrifice ratio; that is, the cumulative additional un-employment or cumulative lost output required to...
Anchor, Float or Abandon Ship: Exchange Rate Regimes for Accession Countries
Buiter, Willem H, Grafe, Clemens
The Paper considers alternative exchange rate regimes for the 10 East European accession candidates, both prior to EU accession and during the period following EU accession but prior to EMU...
Buiter, Willem H, Grafe, Clemens
The paper considers the implications for the EU accession candidates of Central and Eastern Europe of the fiscal-financial constraints imposed by the Stability and Growth Pact and the Maastricht...
Deflation: Prevention and Cure
After an absence of almost half a century, the spectre of deflation is once again haunting the corridors of central banks and finance ministries in the industrial world. While preventing or combating...
This 2003 Institute for Fiscal Studies Lecture addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability and Growth Pact for...
The Paper discusses how the EU accession countries should pursue full membership in the EMU: adopt the euro. The key messages are the following: 1) Even the largest of the accession countries is too...
Monetary theory and policy are part of intertemporal public finance. This Paper reviews some interesting recent developments. The two ghosts are the venerable liquidity trap and the Pigou effect or...
The Paper studies the inflation rate associated with optimal monetary policy in a standard suite of DSGE models, when fiscal policy is either unrestricted optimal or restricted but supportive of...
Generational Accounts, Aggregate Savings, and Intergenerational Distribution
Savings , Consumption , Economic models ,
Aspects of Fiscal Performance in Some Transition Economies Under Fund-Supported Programs
Fiscal policy , Centrally planned economies , Fund-supported adjustment programs , Economic models ,
Notes on 'A Code for Fiscal Stability.'.
This note comments on two central issues for fiscal policy design in the UK, highlighted in the recent "Code for Fiscal Stability" proposed by the new Labour government. The first concerns the merits...
Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy.
The author considers the response of a dependent economy with overlapping generations households to fiscal and financial shocks, an d the influence of alternative budget balancing rules on the...
A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic.
For the range of "small" government deficits for which two stationary solutions exist, an increase in the deficit reduces the long-run rate of inflation if the locally-stable (high inflation)...
Governments through the ages have appropriated real resources through the monopoly of the ‘coinage’. In modern fiat money economies, the monopoly of the issue of legal tender is generally...
Policy Decentralisation and Exchange Rate Management in Interdependent Economies
Buiter, Willem H, Eaton, Jonathan
The demise of Bretton Woods and of the short-lived Smithsonian agreement has raised questions about exchange rate management by monetary authorities acting in isolation from one another. For...
Governments through the ages have appropriated real resources through the monopoly of the ‘coinage’. In modern fiat money economies, the monopoly of the issue of legal tender is generally...
Central banks can go broke and have done so, although mainly in developing countries. The conventional balance sheet of the central bank is uninformative about the financial resources it has at its...
A fall in house prices due to a change in fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of...
This paper analyzes the implications of international asset risks for the operation of the international adjustment process, with special emphasis on the scope for monetary policy. After a brief...
Staggered Wage Setting without Money Illusion: Variations on a Theme of Taylor
In a number of influential recent papers, Taylor (1979a, b; 1980a, b) has analyzed the behaviour of an economy characterized by staggered over-lapping wage contracts and rational expectations. His...
On the Adequacy or Inadequacy of Keynesian Balance-of-Payments Theory: ARejoinder
Willem H. Buiter, Jonathan Eaton
This note again refutes Kuska's proposition that equality between the demand for and supply of money ("money market equilibrium") implies equilibriumin the balance of payments.Indeed, under a regime...
The paper studies budgetary, financial and monetary policy evaluationand design using a comprehensive wealth or permanent income accounting framework. A set of stylized balance sheets and permanent...
The Theory of Optimum Deficits and Debt
The paper surveys a number of neo-classical and neo-Keynesian approcaches to government financial policy. After reviewing the very restrictive conditions under which financial policy is just a veil...
Fiscal policy in open, interdependent economies
The paper studies the effects of alternative financing policies in the open economy.There is a non-trivial role for financial policy because of the failure of first-order debt neutrality due to...
Excess volatility tests for financial market efficiency maintain the hypothesis of risk-neutrality. This permits the specification of the benchmark efficient market price as the present discounted...
The Right Combination of Demand and Supply Policies: The Case for a Two-Handed Approach
The paper considers the analytical underpinnings of the scope for and limits of demand and supply management. After restating a general policy effectiveness result for New-Classical macroeconomic...
Borrowing to Defend the Exchange Rate and the Timing and Magnitude of Speculative Attacks
The paper extends the recent literature on collapsing managed exchange rate regimes by allowing explicitly for the qovernment budget constraint and the interest cost of servicing the public debt. The...
Can Public Spending Cuts be Inflationary?
The paper uses a demand for seigniorage revenue and supply of seigniorage revenue approach to determine the consequences 0 cots in public spending for the rate of inflation. Monetary financing is...
Debt Neutrality, Professor Vickrey and Henry George's "Single Tax"
In the overlapping generations model with uncertain lifetimes, efficient life insurance markets and no operative intergenerational gift and bequest motive, a positive birth rate has been shown to be...
Fiscal Policy Interdependence and Efficiency
Willem H. Buiter, Kenneth M. Kletzer
international transmission of fiscal policy among open interdependent economies under free international capital mobility. With only lump-sum taxes and transfers, international transmission involves...
Rational Speculative Bubbles in an Exchange Rate Target Zone
Willem H. Buiter, Paolo A. Pesenti
The recent theory of exchange rate dynamics within a target zone holds that exchange rates under a currency bard are less responsive to fundamental shocks than exchange rates under a free float,...
Willem H. Buiter, Kenneth M. Kletzer
The paper develops a two-country endogenous growth model to investigate possible causes for the existence and persistence of productivity growth differentials between nations despite a common...
The Welfare Economics of Cooperative and Noncooperative Fiscal Policy
Willem H. Buiter, Kenneth M. Kletzer
In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences)...
Permanent International Productivity Growth Differentials in an Integrated Global Economy
Willem H. Buiter, Kenneth M. Kletzer
The paper analyzes the role of differences in household behavior as a source of persistent and even permanent differences between national or regional productivity growth rates, when there are...
Public Debt in the USA: How Much, How Bad and Who Pays?
The USA is in the middle of the pack of industrial countries as regards the public debt-GOP and public deficit-GOP ratios. The period since 1980 is the only peace-time period outside the Great...
Generational Accounts, Aggregate Saving and Intergenerational Distribution
Are generational accounts informative about the effect of the budget on the intergenerational distribution of resources and (when augmented with generation-specific propensities to consume out of...
Capital Mobility, Fiscal Policy and Growth under Self-Financing of Human Capital Formation
Willem H. Buiter, Kenneth M. Kletzer
This paper considers the effects of fiscal and financial policy on economic growth in open and closed economies, when human capital formation by young households is constrained by the illiquidity of...
A Center-Periphery Model of Monetary Coordination and Exchange Rate Crises
Willem H. Buiter, Giancarlo Corsetti, Paolo A. Pesenti
The paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an anti-...
Willem H. Buiter, Ricardo Lago, Helene Rey
This paper takes a systematic look at the portfolio choice problem faced by Investment Banks or Funds investing in transition economies. We relate the performance of projects in the transition...
Transition Issues for the European Monetary Union
Willem H. Buiter, Anne C. Sibert
If Stage Three of EMU starts on January 1, 1999, transition issues remain on two time scales. Until July 1, 2002, national currencies and the euro co-exist as legal tender. We argue that intra-EMU...
The paper establishes the following: First, money is neutral even if there is a non-zero stock of non-monetary nominal public debt, because the government adjusts real taxes to satisfy its...
Notes on "A Code for Fiscal Stability"
This note comments on two central issues for fiscal policy design in the UK, highlighted in the recent Code for Fiscal Stability' proposed by the new Labour government. The first concerns the merits...
Liquidity Traps: How to Avoid Them and How to Escape Them
Willem H. Buiter, Nikolaos Panigirtzoglou
The paper considers ways of avoiding a liquidity trap and ways of getting out of one. Unless lower short nominal interest rates are associated with significantly lower interest volatility, a lower...
The Fallacy of the Fiscal Theory of the Price Level
It is not common for an entire scholarly literature to be based on a fallacy, that is, 'on faulty reasoning; misleading or unsound argument'. The 'fiscal theory of the price level', recently...
Deflation: Prevention and Cure
After an absence of almost half a century, the spectre of deflation is once again haunting the corridors of central banks and finance ministries in the industrial world. While preventing or combating...
James Tobin: An Appreciation of his Contribution to Economics
Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin's influence...
Willem H. Buiter, Anne C. Sibert
We analyse deflationary bubbles in a model where money is the only financial asset. We show that such bubbles are consistent with the household's transversality condition if and only if the nominal...
The paper discusses some fundamental problems in monetary economics associated with the determination and role of the numeraire. The issues are introduced by formalising a proposal, attributed to...
The Role of Economic Policy After the New Classical Macroeconomics
The paper considers the implications of the rational expectations - New Classical Macroeconomics revolution for the "rules versus discretion" debate. The following issues are covered 1) The...
Granger-Causality and Stabilization Policy
This paper aims to provide a stochastic, rational expectations extension of Tobin's "Money and Income; Post Hoc Ergo Proper Hoc?". It is well-known that money may Granger-cause real variables even...
The paper analyses a class of two-point boundary value problem for systems of linear differential equations with constant coefficients. The boundary conditions are expressed as linear restrictions on...
Macroeconometric Modelling for Policy Evaluation and Design
The paper reviews recent developments in macroeconomic theory and their implications for econometric modelling and for policy design. The following issues are addressed. 1) The theoretical and...
Issues in Controllability and the Theory of Economic Policy
Willem H. Buiter, Mark Gersovitz
The paper demonstrates that the concepts of dynamic controllability are useful for the theory of economic policy by establishing four propositions. First dynamic controllability is a central concept...
The Superiority of Contingent Rules over Fixed Rules in Models with Rational Expectations
The paper investigates the robustness of the proposition that in stochastic models contingent or feedback rules dominate fixed or openloop rules. Four arguments in favour of fixed rules are...
Predetermined and Non-Predetermined Variables in Rational Expectations Models
The distinction between predetermined and non-predetermined variables is a crucial one in rational expectations models. I consider and reject two definitions, one proposed by Blanchard and Kahn and...
Optimal and Time-Consistent Polices in Continuous Time Rational Expectations Models
In this note the method of Hamiltonian dynamics is used to characterize the time-consistent solution to the optimal control problem in a deterministic continuous time rational expectations model. A...
The paper surveys some recent developments in policy evaluation and design in continuous time linear rational expectations models. Much recent work in macroeconomics and open economy macroeconomics...
The paper presents a general solution method for rational expectations models that can be represented by systems of. deterministic first order linear differential equations with constant...
A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic
The note mines an unsuspected lode in the Sargent-Wallace "Unpleasant Monetarist Arithmetic" deposit. While that model is shown to be incapable of generating hyperinflations as a result of large...
Granger-Causality and Policy Ineffectiveness: A Rejoinder
In an earlier paper,"Granger-causality and Policy Effectiveness," Economica [1984], I showed that for a policy instrument x to Granger-cause some target variable y is not necessary for x to be useful...
A fall in house prices due to a change in fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of...
Why the United Kingdom Should Join the Eurozone
The message of this paper is that the global financial crisis that started in August 2007 provides another powerful and sufficient argument for the United Kingdom to join the EMU and adopt the euro...
Is Iceland an Optimal Currency Area?
The paper considers the pros and cons for Iceland adopting the euro as legal tender. The current Icelandic monetary arrangements are contrasted both with a unilateral adoption of the euro and with a...
Principles of Budgetary and Financial Policy
What principles should govern the design of governmental, budgetary and financial policy? Policymakers in the major industrial countries and officials of international organizations are deeply...
Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation: Some Further Results
Negative Nominal Interest Rates: Three ways to overcome the zero lower bound
The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They...
Negative Nominal Interest Rates: Three ways to overcome the zero lower bound
The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They...
Financial Markets and European Monetary Cooperation
Buiter,Willem H., Corsetti,Giancarlo, Pesenti,Paolo A.
A blend of theoretical and policy-oriented analysis, this book provides a comprehensive assessment of the causes and implications of the 1992–93 crisis of the exchange rate mechanism of the...
Financial Markets and European Monetary Cooperation
Buiter,Willem H., Corsetti,Giancarlo, Pesenti,Paolo A.
A blend of theoretical and policy-oriented analysis, this book provides a comprehensive assessment of the causes and implications of the 1992–93 crisis of the exchange rate mechanism of the...
International Economic Policy Coordination
Buiter,Willem H., Marston,Richard C.
This volume, first published in 1985 and based on a conference organised jointly by the Centre for Economic Policy Research and the National Bureau of Economic Research, examines developments in the...
Willem H. Buiter, Ricardo Lago, Hélène Rey
This paper takes a systematic look at the portfolio choice problem faced by Investment Banks or Funds investing in transition economies. We relate the performance of projects in the transition...