Monetary policy rules in theory and in practice: evidence from the UK and the US
AbstractGiven the large amount of interaction between research on monetary policy and its practice, this article examines whether some simple monetary policy rules that have been proposed in the academic literature, part of which has originated from within central banks, provide a reasonable characterization of actual policy in the United Kingdom and the United States. The article finds the simple rule that describes best the actual US monetary policy is a speed limit rule with dynamics, whilst for the UK it is a forward-looking rule. The simpler dynamics in the UK's monetary policy rule are reflective of the lower persistence of inflation as a result of its policy of inflation targeting.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 41 (2009)
Issue (Month): 16 ()
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Other versions of this item:
- Páez-Farrell, Juan, 2007. "Monetary Policy Rules in Theory and in Practice: Evidence from the UK and the US," Cardiff Economics Working Papers E2007/13, Cardiff University, Cardiff Business School, Economics Section.
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- Muneesh Kapur & Michael Debabrata Patra, 2010. "A Monetary Policy Model Without Money for India," IMF Working Papers 10/183, International Monetary Fund.
- Juan Paez-Farrell, 2012. "Resuscitating the ad hoc loss function for monetary policy analysis," Discussion Paper Series 2012_06, Department of Economics, Loughborough University, revised Jun 2012.
- Brendon, Charles & Paustian, Matthias & Yates, Tony, 2013. "The pitfalls of speed-limit interest rate rules at the zero lower bound," Bank of England working papers 473, Bank of England.
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