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Inflation Targeting: The UK Experience

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  • Charles Bean

Abstract

I first review the background to the adoption of an inflation target in 1992 and the subsequent development of the regime, in particular the delegation of operational responsibility for monetary policy to the Bank of England in 1997 and the associated institutional framework. I then go on to explain some aspects of the way the MPC formulates and conducts policy at the Bank, relating it to some of the burgeoning literature on inflation targeting. I next review some aspects of performance since the Bank's independence. I conclude with a discussion of the topical question of how monetary policy should respond to asset price booms and high rates of debt accumulation. Copyright Verein für Socialpolitik und Blackwell Publishers Ltd, 2004

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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal Perspektiven der Wirtschaftspolitik.

Volume (Year): 5 (2004)
Issue (Month): 4 (November)
Pages: 405-421

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Handle: RePEc:bla:perwir:v:5:y:2004:i:4:p:405-421

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References

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  1. Lars E.O. Svensson, 1998. "Inflation Targeting as a Monetary Policy Rule," NBER Working Papers 6790, National Bureau of Economic Research, Inc.
  2. David Gruen & Michael Plumb & Andrew Stone, 2005. "How Should Monetary Policy Respond to Asset-Price Bubbles?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
  3. Svensson, L-E-O, 1997. "Inflation Targeting : Some Extensions," Papers 625, Stockholm - International Economic Studies.
  4. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Interest-Rate Rules: II. Applications," Levine's Bibliography 506439000000000394, UCLA Department of Economics.
  5. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  6. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  7. Svensson, Lars E O, 1999. "Price-Level Targeting versus Inflation Targeting: A Free Lunch?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 277-95, August.
  8. Bean, Charles, 1998. "The New UK Monetary Arrangements: A View from the Literature," Economic Journal, Royal Economic Society, vol. 108(451), pages 1795-1809, November.
  9. Charles Bean, 2003. "Asset prices, financial imbalances and monetary policy: are inflation targets enough?," BIS Working Papers 140, Bank for International Settlements.
  10. Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2004. "Has Monetary Policy Become More Efficient? A Cross Country Analysis," NBER Working Papers 10973, National Bureau of Economic Research, Inc.
  11. Stephen G. Cecchetti & Hans Genberg & Sushil Wadhwani, 2002. "Asset Prices in a Flexible Inflation Targeting Framework," NBER Working Papers 8970, National Bureau of Economic Research, Inc.
  12. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  13. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
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Cited by:
  1. Gill Hammond, 2012. "State of the art of inflation targeting," Handbooks, Centre for Central Banking Studies, Bank of England, edition 4, number 29.
  2. Sujit Kapadia, 2005. "Inflation-Target Expectations and Optimal Monetary Policy," Money Macro and Finance (MMF) Research Group Conference 2005 81, Money Macro and Finance Research Group.
  3. Sujit Kapadia, 2005. "Inflation-Target Expectations and Optimal Monetary Policy," Economics Series Working Papers 227, University of Oxford, Department of Economics.
  4. Ftiti, Zied, 2010. "The macroeconomic performance of the inflation targeting policy: An approach based on the evolutionary co-spectral analysis (extension for the case of a multivariate process)," Economic Modelling, Elsevier, vol. 27(1), pages 468-476, January.
  5. Jane Sneddon Little & Teresa Foy Romano, 2008. "Inflation targeting: central bank practice overseas," Public Policy Brief, Federal Reserve Bank of Boston.

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