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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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  1. Lars E. O. Svensson, 1997. "Inflation Targeting: Some Extensions," NBER Working Papers 5962, National Bureau of Economic Research, Inc.
  2. Svensson, L.E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Papers 646, Stockholm - International Economic Studies.
  3. David Gruen & Michael Plumb & Andrew Stone, 2003. "How Should Monetary Policy Respond to Asset-price Bubbles?," RBA Annual Conference Volume, in: Anthony Richards & Tim Robinson (ed.), Asset Prices and Monetary Policy Reserve Bank of Australia.
  4. 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.
  5. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  6. 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.
  7. 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.
  8. Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2006. "Has Monetary Policy become more Efficient? a Cross-Country Analysis," Economic Journal, Royal Economic Society, vol. 116(511), pages 408-433, 04.
  9. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Interest-Rate Rules: II. Applications," Levine's Bibliography 506439000000000394, UCLA Department of Economics.
  10. Svensson, Lars E O, 1996. "Price-level Targeting versus Inflation Targeting: A Free Lunch?," CEPR Discussion Papers 1510, C.E.P.R. Discussion Papers.
  11. Charles Bean, 2003. "Asset prices, financial imbalances and monetary policy: are inflation targets enough?," BIS Working Papers 140, Bank for International Settlements.
  12. 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.
  13. 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.
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Cited by:
  1. 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.
  2. Jane Sneddon Little & Teresa Foy Romano, 2008. "Inflation targeting: central bank practice overseas," Public Policy Brief, Federal Reserve Bank of Boston.
  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. Gill Hammond, 2012. "State of the art of inflation targeting," Handbooks, Centre for Central Banking Studies, Bank of England, edition 4, number 29.

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