Kenneth Clarke's second round
Article Abstract:
The second Budget presented by UK Chancellor of the Exchequer Kenneth Clarke is a model of sound macroeconomic strategy. It continues the government's admirable restraint on the expenditures side while introducing tax measures that reduce revenues as a percentage of GDP. The Budget basically extends the strategy adopted by the UK government in the aftermath of the pound's forced withdrawal from the European Rate Mechanism in 1992. This economic strategy has since led to a robust devaluation-induced recovery which has raised growth while lowering inflation and unemployment. Clarke's budget should be seen as a welcome confirmation of the government's decision to emphasize relatively loose monetary policy along with tighter fiscal approaches, a policy approach which provides the UK with its best propsect yet of sustainable and noninflatonary growth in the mid- to late 1990s.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1995
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'It's the real economy, stupid!' (exchange rate policy)
Article Abstract:
The British government's decision to withdraw the pound sterling from the European Rate Mechanism (ERM) in 1992 has proved to be one of its astute decisions to date. Among others, the ERM withdrawal has helped spur economic recovery, boost economic growth and increase job creation. In retrospect, the European currency crisis that provoked the sterling's withdrawal in 1992 has proved to be a positive event for most of the countries that were forced to devalue their currencies after the crisis. In these countries, devaluation allowed pro-growth policies to be implemented, helping to end the downturns that had weakened these countries' economies. The lesson, perhaps, for policymakers is that measures to improve the competitiveness of the real economy are more important than measures to promote exchange rate stability.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1995
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More than a gesture?
Article Abstract:
The Bank of England's decision to lower base rates in Dec. 1995 may prove to be misguided. At the time, the move may have seemed prudent to authorities since the economy looked weak and the Budget did not appear to be expansive enough. However, it is argued that cutting the rates was a bad decision because there were already signs that the British economy was poised to pick up. On Dec. 13, 1995, on the same day that the cuts were announced, economic data were released reporting that retail sales volumes have increased, unemployment has fallen considerably and the number of job vacancies has reached a record high. These data did not paint a picture of an economy requiring any policy stimulus. The unnecessary reduction of the base rates is expected to be reversed in 1997.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1996
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