Uk Fiscal Policy : Analysis
The UK government uses both fiscal and monetary policy in its control of the economy. Discuss and analyse this statement.
CONTENTS
Topic Page Number
1. Abstract 3
2. Introduction 3
3. Methodology 4
4. Fiscal Policy 5
5. Monetary Policy 6
6. Working of the monetary Policy 7
7. Analysis 8
8. Conclusion/ Recommendations 11
9. References 12
ABSTRACT
The Government has taken significant steps to strengthen the framework for fiscal policy since taking office in year 1997. Fiscal policy is directed firmly towards maintaining sound public finances over the medium term, and it also supports monetary policy over the economic cycle. The fiscal policy with the new monetary policy framework provides stability necessary for achieving the Government's central economic goal of high and sustainable levels of growth and employment. (Gregory Mankiw, 2007).
Monetary stability means stable prices - low inflation - and confidence in the currency. Government's inflation target defines the Stable prices, which the Bank of England seeks to meet through the decisions on interest rates taken by the Monetary Policy Committee. (www.bankofengland.com) [Accessed on 13/11/2008]
Gordon Brown, as a chancellor in the Tony Blair Government, specified golden rule of fiscal policy. The golden rule tries to ensure fairness between generations and also contributes to a prudent approach to the public finances. Current spending and revenue are the most significant drivers of trends in public sector net borrowing. Hence, achieving the golden rule plays a major part in keeping borrowing to levels consistent with a prudent and sustainable net debt ratio. The golden rule and the sustainable investment rule work together in managing the UK economy. ( http://www.hm-treasury.gov.uk) [Accessed on 27/11/2008]
INTRODUCTION
Fiscal policy refers to government attempts to
CONTENTS
Topic Page Number
1. Abstract 3
2. Introduction 3
3. Methodology 4
4. Fiscal Policy 5
5. Monetary Policy 6
6. Working of the monetary Policy 7
7. Analysis 8
8. Conclusion/ Recommendations 11
9. References 12
ABSTRACT
The Government has taken significant steps to strengthen the framework for fiscal policy since taking office in year 1997. Fiscal policy is directed firmly towards maintaining sound public finances over the medium term, and it also supports monetary policy over the economic cycle. The fiscal policy with the new monetary policy framework provides stability necessary for achieving the Government's central economic goal of high and sustainable levels of growth and employment. (Gregory Mankiw, 2007).
Monetary stability means stable prices - low inflation - and confidence in the currency. Government's inflation target defines the Stable prices, which the Bank of England seeks to meet through the decisions on interest rates taken by the Monetary Policy Committee. (www.bankofengland.com) [Accessed on 13/11/2008]
Gordon Brown, as a chancellor in the Tony Blair Government, specified golden rule of fiscal policy. The golden rule tries to ensure fairness between generations and also contributes to a prudent approach to the public finances. Current spending and revenue are the most significant drivers of trends in public sector net borrowing. Hence, achieving the golden rule plays a major part in keeping borrowing to levels consistent with a prudent and sustainable net debt ratio. The golden rule and the sustainable investment rule work together in managing the UK economy. ( http://www.hm-treasury.gov.uk) [Accessed on 27/11/2008]
INTRODUCTION
Fiscal policy refers to government attempts to