Targets, Zones and Asymmetries:A Flexible Nonlinear Model of Recent UK Monetary Policy
AbstractWe estimate a flexible model of the behaviour of UK monetary policymakers in the era of inflation targeting based on a new representation of policymaker’s preferences. This enables us to address a range of issues that are beyond the scope of the existing literature. We find a complex relationship between interest rates and inflation: interest rates are passive when inflation is close to the target but there is an increasingly vigorous response as inflation deviates further from the target. We also find that the response to the output gap is linear and find no evidence of a nonlinear Phillips curve.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 05-21.
Length: 25 pages
Date of creation: Oct 2005
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Virginie Boinet & Christopher Martin, 2008. "Targets, zones, and asymmetries: a flexible nonlinear model of recent UK monetary policy," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 423-439, July.
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