Interest Rates and Macroeconomic Policy

  • John S. Flemming


This chapter addresses four themes. The first is the way in which inappropriate monetary policy may cause unemployment. This possibility is not peculiarly Keynesian, indeed Friedman’s prescription of steady money supply growth is based on the view that this is the relevant ‘appropriate policy’ to avoid recession and unemployment. The second theme relates to the relative methodological merits of specifying monetary policy in terms of the quantity of money, as Friedman does (and Keynes is usually thought to have), or in terms of the interest rate itself. Thirdly I look at the same issue in more practical terms of policy design, and finally at the role of the interest rates in achieving an intermediate target for the exchange rate as a way of pursuing a smooth path for nominal GDP.


Exchange Rate Interest Rate Monetary Policy Real Exchange Rate Money Supply 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. ARTIS, M. J. AND D. A. CURRIE (1981) ‘Monetary Targets and the Exchange Rate: a Case for Conditional Targets’, Oxford Economic Papers, vol. 81, Supplement, July.Google Scholar
  2. BARRO, R. J. (1979) ‘On the Determination of the Public Debt’, Journal of Political Economy, vol. 87, no. 5, Pt. i, October.Google Scholar
  3. BARRO, R. J. (1987) ‘Monetary policy under Exchange Rate Targeting and Other Arrangements’, Mimeo.Google Scholar
  4. BARRO, R. J. AND H. I. GROSSMAN (1976) Money, Employment and Inflation ( New York: Cambridge University Press).CrossRefGoogle Scholar
  5. BLAKE, A. AND M. WEALE (1988) ‘Exchange Rate Targets and Wage Formation’, National Institute Economic Review, no. 123, February.Google Scholar
  6. BUITER, W. E. H. (1981) ‘The Superiority of Contingent Rules over Fixed Rules in Models with Rational Expectations’, Economic Journal, vol. 91, no. 363, September.Google Scholar
  7. FENDER, J. (1981) Understanding Keynes: an Analysis of the General Theory ( Brighton: Harvester Press).Google Scholar
  8. FLEMMING, J. S. (1976) Inflation ( Oxford: Oxford University Press).Google Scholar
  9. FLEMMING, J. S. (1981) ‘The Role of Expectations in Fiscal and Monetary Policy’, in M. J. Artis and M. H. Miller (eds), Essays in Fiscal and Monetary Policy ( Oxford: Oxford University Press (for IFS)).Google Scholar
  10. FLEMMING, J. S. (1987A) ‘Wage Flexibility and Employment Stability’, Oxford Economic Papers, vol. 39, no. 1, March.Google Scholar
  11. FLEMMING, J. S. (1987B) ‘Debt and Taxes in War and Peace: the Case of a Small Open Economy’, in M. J. Boskin, J. S. Flemming and S. Gorini (eds), Private Saving and Public Debt ( Oxford: Basil Blackwell ).Google Scholar
  12. FLEMMING, J. S. (1988) ‘Three Points on the Yield Curve’, Money Study Group, forthcoming.Google Scholar
  13. HICKS, J. R. (1935) ‘A Suggestion for Simplifying the Theory of Money’, Economics, reprinted in J. R. Hicks (1967), Critical Essays in Monetary Theory ( Oxford: Clarendon Press).Google Scholar
  14. KEYNES, J. M. (1936) General Theory of Employment, Interest and Money ( London: Macmillan).Google Scholar
  15. MALINVAUD, E. (1977) The Theory of Unemployment Reconsidered ( Oxford: Basil Blackwell).Google Scholar
  16. MALINVAUD, E. (1980) Profitability and Unemployment ( Cambridge: Cambridge University Press).Google Scholar
  17. MANKIW, N. G. (1986) ‘The Optimal Collection of Seignorage’, Mimeo, Harvard.Google Scholar
  18. MEADE, J. E. (1987) ‘Monetary and Fiscal Policy: the Assignment of Weapons to Targets’, Mimeo, Department of Applied Economics, Cambridge.Google Scholar
  19. NEARY, J. P. AND J. E. STIGLITZ (1983) ‘Towards a Reconstruction of Keynesian Economics: Expectations and Constrained Equilibria’, Quarterly Journal of Economics, vol. 98, no. 3, Supplement.Google Scholar
  20. PATINKIN, D. (1976) Keynes’ Monetary Thought, (Durham, North Carolina: Duke University Press).Google Scholar
  21. WICKSELL, K. (1935) Lectures in Political Economy II ( London: Routledge & Kegan Paul).Google Scholar

Copyright information

© National Economic Development Office 1988

Authors and Affiliations

  • John S. Flemming

There are no affiliations available

Personalised recommendations