Exchange Rate Policies, Prices and Supply-Side Response

Although there is some uncertainty about the prices at which trading takes place on the oil market, there is no doubt that the falls in oil prices since the early part of this year amount to one of the most significant economic events of the 1980s. If falls of such magnitude are maintained, investment plans in the oil sector, and depletion policy, could be affected. Furthermore, other supply-side changes may be set in train, due to the relative price (of oil to other fuels) change, and switches in profitability from the oil sector to other sectors of the economy. There are other, more immediate and quantifiable effects of oil price changes however: on demand, on the exchange rate and on prices. In this note we will offer estimates of the second set of effects, abstracting from effects on North Sea oil investment, and from any effects that improved profitability of the non-oil sectors of the economy may exert on investment apart from those associated with the increase in macroeconomic activity. A ‘no change’ assumption for oil investment is made for convenience, and to ease comparison with other simulations reported subsequently in Section 3. As for investment in the non-oil sector, our econometric work has failed to detect an influence for company profits once full allowance is made for expected future sales by this sector.

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The Policy Assignment Principle with Wage Indexation

The American Economist ◽

10.1177/056943450204600208 ◽

2002 ◽

Vol 46 (2) ◽

pp. 80-87

Author(s):

Wen-Ya Chang ◽

Ching-Chong Lai

Keyword(s):

Exchange Rate ◽

Exchange Rates ◽

Capital Mobility ◽

Supply Side ◽

Foreign Reserves ◽

Fixed Exchange Rates ◽

Managed Floating ◽

Wage Indexation

This paper is the first attempt to examine the role of alternative wage indexation schemes in coordination between fiscal and exchange rate policies to achieve given desirable macroeconomic targets under fixed exchange rates with perfect capital mobility. By introducing an explicit specification of the supply side similar to Sachs (1980) and Pitchford (1990) into the Mundell (1963) framework, we show that the crucial factor determining whether the mixture of fiscal and exchange rate policies will successfully work to stabilize output and official foreign reserves is the degree of wage indexation. Furthermore, we also show that such a finding under fixed exchange rates is robust when the analysis shifts to the system of a managed floating regime.

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Kaldor after Ricardo, Keynes, and Kalecki: Perspectives on theory and policies

Acta Oeconomica ◽

10.1556/032.2017.67.s.4 ◽

2017 ◽

Vol 67 (s1) ◽

pp. 37-46

Author(s):

Stuart Holland

Keyword(s):

Exchange Rate ◽

General Theory ◽

Imperfect Competition ◽

First Generation ◽

The State ◽

Supply Side ◽

Regional Employment ◽

Exchange Rate Changes ◽

Progressive Force ◽

Macroeconomic Aggregates

Nicholas Kaldor was a progressive force in economics who made several major contributions, which are well covered by other contributors to this issue in his memory. Yet, like most first generation Keynesians, he stayed within the paradigm of The Concluding Notes to the General Theory, in which Keynes claimed that provided the State intervened to manage the level of demand, the supply side of an economy could be left to the processes of perfect or imperfect competition, whereas Kalecki realised that oligopoly could influence both macroeconomic aggregates and policies. Like Keynes, he also assumed, with Ricardo, that trade was between different firms in different countries rather than recognising that capital already was multinational and that this could qualify both exchange rate changes such as that of the sterling in 1967 and his regional employment premium and selective employment tax.

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