Designing and Choosing Macroeconomic Frameworks: The Position of the UK after Four Years of the Euro

Abstract

Fiscal and monetary policy framework have become increasingly popular as disenchantment with active stabilisation policy has increased. In order to maximise the gains in terms of welfare and output frameworks need to be designed to achieve targets efficiently and stabilise the volatility of the economy. We evaluate the current fiscal and monetary frameworks in the UK and the Euro Area, and suggest where they can be improved. The UK has notably worse productivity than the Euro Area, and the design of policy fra…