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Bulletin
12 December 1985
IN
THIS ISSUE...
This issue of the Bulletin has a strong European and
international focus. In the first article, Research Fellow Tony Venables
discusses recent developments in international trade theory which
incorporate imperfectly competitive behaviour by firms. This new
approach not only improves our ability to explain observed patterns of
trade but also casts new light on industrial and trade policies. There
are also reports of recent workshops on economic interdependence and
macroeconomic policy in Europe and on European Community enlargement.
November saw the launch of the new journal Economic Policy a European
forum for the discussion of topical policy issues. At the same time as
the first issue of the journal was launched, the Economic Policy Panel
met for the second time in London, to discuss topics which included the
European Monetary System and the Mitterrand experiment in France. This
issue of the Bulletin also contains reports of lunchtime meetings on
economic policy in Greece, the consequences of UK membership of the
exchange rate mechanism of the European Monetary System, a comparative
international study of corporate finance, and financing old age.
Counsels
of Imperfection
Anthony Venables discusses new approaches to international trade theory
which incorporate imperfect competitition. They improve our explanation
of the pattern of international trade and offer a new perspective on the
design of industrial and trade policy. The effectiveness of policy
interventions, argues Venables, depends crucially on the precise nature
of the interactions between firms and the government and among firms
themselves.
Economic
Policy
The first issue of this new European journal was launched in November
during the London meeting of the Economic Policy Panel. Topics discussed
by the Panel included the European Monetary System and the Mitterrand
experiment in France.
EC
Enlargement
Greece, Portugal and Spain have recently joined the European Community.
What effects will the addition of these new members have on the
economies of the Community? CEPR organized a workshop to discuss
research priorities in this area. Labour mobility, liberalization of
capital markets and problems of policy coordination were identified as
key issues for future research.
European
Macro Policy
CEPR has launched a joint research programme on the effects of
interdependence on macroeconomic policy in Europe, funded by the
Economic and Social Research Council and the Centre National de la
Recherche Scientifique. The researchers involved in the project held
their first UK meeting in November, when they were joined by central
bank economists to discuss research needs in this area.
Economic
Policy in Greece
Louka Katseli analyzed the economic policy in Greece under PASOK at
a November lunchtime meeting. She argued that the policies had suffered
setbacks during 1981-85, but that some measure of success was achieved.
The PASOK experience offered useful lessons to countries trying to
pursue a socialist path of development in modern conditions.
European
Monetary System
EMS membership would be a disaster for the UK, argued Patrick Minford at
a November lunchtime meeting. He agreed with the the Treasury and Civil
Service Select Committee which recommended against UK membership in its
recent report.
New
Research on Corporate Finance
Previous studies of the provision of finance for industry have been
flawed by the lack of a coherent theoretical framework, argued Research
Fellows Colin Mayer and Margaret Bray. They outlined plans for new
research into finance for industry which will emphasize the importance
of information flows and will make use of new and more detailed data on
loan contracts.
The
Debate on SERPS
The Government proposed abolition of the State Earnings-Related Pension
Scheme in its 1985 Green Paper; it later announced plans to scale down
SERPS. Paul Johnson argued that these proposals were misconceived and
that the debate concerning SERPS
failed to address the real problems of finance for old age.
Discussion Papers
Nicholas Crafts argues that the 1930s
jobless were
reluctant conscripts and not willing volunteers to the army of the
unemployed.
Andrew Hughes Hallett provides quantitative estimates of the benefits of
policy
coordination betweeen the US and Europe
. The gains are significant and favour Europe.
David Currie and his co-authors compare the behaviour of 'monetarist'
and 'bondist' macroeconomic policies
for the UK.
Patrick Minford argues that government
deficits add a risk
premium to interest rates because of the risk of inflationary default.
Partha Dasgupta and Joseph Stiglitz explore the effects of learning-by-doing
on market structures
and its implications for trade and industrial policies.
Gilles Oudiz analyzes the benefits which could arise if European
governments coordinated their macroeconomic policies
.
Jay Winter predicts that current demographic trends, coupled with rising
medical costs, will face
policy makers with a choice between health care and other social
services .
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