Monetary Policy and International Competitiveness

Willem H. Buiter, Marcus H. Miller

NBER Working Paper No. 591 (Also Reprint No. r0251)
Issued in December 1980
NBER Program(s):   ITI   IFM

A model of Dornbusch is adapted to analyze the consequences for output and competitiveness of certain aspects of the U.K. government's medium term financial strategy and some other policy actions. This includes the announcement of a sequence of reductions in the target rate of monetary growth, an increase in VAT and a move to make the U.K. banking system more competitive. The impact of a discovery of domestic oil is also modeled. We consider the consequences of varying the degree of inertia in the underlying rate of inflation and of different rates of international capital mobility. A real interest rate equalization tax stabilizes the real exchange rate but not the level of output. Once and for all changes in the level of the nominal money stock to accommodate changes in the demand for real money balances prevent 'overshooting' of the real exchange rate and fluctuations in output. It may, however, undermine the credibility of an announced policy of monetary disinflation.

download in pdf format
   (2677 K)

email paper

This paper is available as PDF (2677 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0591

Published: Buiter, Willem H. and Miller, Marcus H. "Monetary Policy and Internationalmpetitiveness: The Problems of Adjustment." Oxford Economic Papers, Vol. 33 , (July 1981, Supplement), pp. 143-175.

Users who downloaded this paper also downloaded these:
Buiter and Miller w0749 Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation
Alesina and Perotti w4810 The Welfare State and Competitiveness
Summers Tax Policy and International Competitiveness
Bergin and Corsetti w19356 International Competitiveness and Monetary Policy: Strategic Policy and Coordination with a Production Relocation Externality
Lipsey, Molinari, and Kravis w3442 Measures of Prices and Price Competitiveness in International Trade in Manufactured Goods
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us