The Macroeconomics, Financial Linkages and the Regions (MFLR) programme is concerned with theoretical and policy-related analysis at the macroeconomic and regional levels. The classic questions remain pertinent: What policies and institutions may be adopted to boost an economy's secular, or long-run, growth rate? What policies can be implemented in order to attenuate inefficient fluctuations in economic activity over the business cycle? How do frictions to international trade affect trade patterns and economic growth? What are the key interactions between fiscal and monetary policy? What are the determinants of key asset prices, such as housing prices and exchange rates, and what role do asset prices play in influencing macroeconomic outcomes? What causes financial crises and how should monetary and fiscal policy respond?
A particular focus of this programme will be in framing these questions in a setting which recognises the dramatic increase in financial and trade linkages between countries - globalisation - whilst taking into account within-country asymmetries. For example, in the euro area monetary policy is centralised whilst fiscal policy remains at the discretion of individual countries, although that may change. There are similar issues for Scotland within the UK concerning, for example, the appropriate structure of fiscal decision-making. Following the recent financial crisis these topics have taken on a renewed importance in the research agenda.
The programme builds on the core strengths in macroeconomics, based primarily at the Universities of Glasgow and St Andrews, including the St Andrews-based Centre for Dynamic Macroeconomic Analysis (CDMA), and in regional economics, based primarily at the University of Strathclyde, including the joint Glasgow-Strathclyde multidisciplinary Centre for Public Policy for Regions (CPPR). As part of the SIRE initiative the MFLR programme has made 14 new appointments, 9 senior Professorial appointments and 5 more junior appointments.
User engagement
Conferences run under the auspices of MFLR will often combine academic and policy-oriented elements. For example, a recent conference at Heriot-Watt University entitled: "Monetary policy before, during and after the crisis". This conference brought together senior academic and policy advisors to discuss key topics following the recent financial crisis. This event also provided advanced training for PhD students in monetary policy research and showcased the research undertaken by PhD students across a number of Scottish Universities.
We aim to raise the profile of policy-relevant work by a deeper liaison with the Scottish press. This will be facilitated by the "Policy Notes" series aimed at a wider, less technically-oriented, audience than conventional Working Papers. A number of our video-conference seminars / workshops will have a policy-oriented theme. We will invite researchers and other interested parties at user institutions to participate as attendees or as presenters. This will help to ensure that the macro research conducted in Scotland filters through to the very highest levels of policy-making.
A number of the economists associated with MFLR have strong links to, inter alia, the IMF, the European Central Bank, the European Commission, the OECD and the World Trade Organisation. Closer to home, the MFLR research themes are of direct relevance to UK regional and national agencies (including, the Scottish Executive and Scottish Enterprise, the Bank of England, and the UK Treasury.
Past examples of user group interest in work from this group include: work on the coordination of monetary and fiscal policy; the smoothing of UK and other countries' interest rates; equilibrium exchange rates for the euro area (for example, this work was used to calculate the entry rates for European Monetary Union); and a widely cited IMF report recommending a revision to GDP comparisons, which resulted in China rising to second in the world. Research in the 'emerging markets' context is of interest to UK and international development agencies such as DfID and the World Bank.
SIRE will allow us to build upon, and integrate, existing networks into robust, stimulating fora for interaction with the wider policy community. Such interaction will be facilitated in part through an appropriately co-ordinated, and carefully targeted, series of seminars, intended to provide policy-makers and opinion-formers with the highest quality, policy-relevant research output, communicated in an appropriate manner.