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Monetary information and monetary policy decisions: Evidence from the euroarea and the UK

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  • Chevapatrakul, Thanaset
  • Kim, Tae-Hwan
  • Mizen, Paul

Abstract

This paper uses a modified New Keynesian framework to consider the use of monetary information in making monetary policy decisions. We add monetary indicators derived from theoretical models to conventional economic variables in an instrument rule and estimate the equations using euroarea and UK data recognizing that interest rates are set discretely. There is an improvement in the ability to predict changes in interest rates when we introduce monetary indicators which is robust to alternative model specifications. This result adds to a growing literature on the role of monetary indicators showing that this information helps predict interest rate decisions as well as inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 2 ()
Pages: 326-341

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Handle: RePEc:eee:jmacro:v:34:y:2012:i:2:p:326-341

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Monetary policy rules; Money; Quantity theory; European Central Bank; Bank of England;

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References

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