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The Bank of England Macroeconomic Model: Its Nature and Implications

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  • Philip Arestis
  • Malcolm Sawyer

Abstract

The Bank of England’s report on its approach to macroeconomic modeling reveals the underlying structure of their macroeconomic model used for policy purposes. A simplified representation of the Bank of England model is presented, which is less disaggregated than the original model and focuses on the “long run” relationships. Following current econometric practice, the Bank of England generally estimates long-run steady-state relationships that have embedded short-run dynamics and error correction mechanisms. It is argued that the Bank of England has adopted an essentially endogenous view of money. The model is used to explore the effectiveness of the use of interest rates for the control of inflation and the implications of the macroeconomic model for monetary policy and its channels of influence throughout the economy.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2002. "The Bank of England Macroeconomic Model: Its Nature and Implications," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 24(4), pages 529-545, July.
    • Handle: RePEc:mes:postke:v:24:y:2002:i:4:p:529-545
    DOI: 10.1080/01603477.2002.11490342
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    Citations

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    Cited by:

    1. Philip Arestis & Malcolm Sawyer, 2003. "Does the stock of money have any causal significance?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 113-136.
    2. Goutsmedt, Aurélien & Sergi, Francesco & Cherrier, Beatrice & Claveau, François & Fontan, Clément & Acosta, Juan, 2023. "To change or not to change The evolution of forecasting models at the Bank of England," SocArXiv m2cet, Center for Open Science.
    3. Peter Howells & Iris Mariscal, 2006. "Monetary Policy Regimes. A Fragile Consensus," International Journal of Political Economy, Taylor & Francis Journals, vol. 35(1), pages 62-83.
    4. Scobie, Grant M, 2020. "If Bill Phillips were Governor ...? Some implications of his work for contemporary macroeconomic policy," Working Paper Series 21096, Victoria University of Wellington, Chair in Public Finance.
    5. Philip Arestis & Malcolm Sawyer, 2003. "Macroeconomic Policies of the Economic Monetary Union: Theoretical Underpinnings and Challenges," Economics Working Paper Archive wp_385, Levy Economics Institute.
    6. Paul Downward & Andrew Mearman, 2005. "Methodological Triangulation at the Bank of England:An Investigation," Working Papers 0505, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    7. Philip Arestis & Malcolm Sawyer, 2002. "Can Monetary Policy Affect The Real Economy?," Macroeconomics 0209012, University Library of Munich, Germany.
    8. Juan Acosta & Beatrice Cherrier & François Claveau & Clément Fontan & Aurélien Goutsmedt & Francesco Sergi, 2023. "Six Decades of Economic Research at the Bank of England," Post-Print hal-03919394, HAL.
    9. Paul Downward & Andrew Mearman, 2008. "Decision-making at the Bank of England: a critical appraisal," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 385-409, July.
    10. Giuseppe Fontana & Alfonso Palacio-Vera, 2004. "Monetary Policy Uncovered: Theory and Practice," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-19.
    11. Marc Lavoie, 2006. "A Post‐Keynesian Amendment To The New Consensus On Monetary Policy," Metroeconomica, Wiley Blackwell, vol. 57(2), pages 165-192, May.

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