Monetary Policy, Nominal Interest Rates, and Long-horizon Inflation Uncertainty
AbstractEmpirical evidence presented in this paper shows that the predictability of inflation at long horizons varies considerably across countries. Both simple theory and empirical evidence suggest that the crucial factor is the extent to which systematic monetary policy succeeds in stabilising the incipient unit root in inflation. The mechanism by which it does this appears, however, to be complicated by strong empirical evidence that nominal interest rates have real effects, which implies that monetary policy need not be so vigorous in reaction to inflation. This helps explain why inflation rates in the US and (especially) Germany have been relatively predictable, despite monetary policy rules which appear to have been barely stabilising. The paper also presents tentative evidence that the power of nominal interest rate effects is inversely related to long-horizon inflation uncertainty, and hence ultimately uncertainty about monetary policy.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 9820.
Date of creation: Oct 1998
Date of revision:
Contact details of provider:
Web page: http://www.econ.cam.ac.uk/index.htm
Monetary policy; Nominal interest rates; Inflation uncertainty;
Other versions of this item:
- Wright, Stephen, 2002. "Monetary Policy, Nominal Interest Rates, and Long-Horizon Inflation Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(1), pages 61-90, February.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fuhrer, Jeff & Moore, George, 1995.
The Quarterly Journal of Economics,
MIT Press, vol. 110(1), pages 127-59, February.
- Bernanke, Ben S. & Mihov, Ilian, 1998.
"The liquidity effect and long-run neutrality,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 49(1), pages 149-194, December.
- Goodhart, Charles A. E. & Hofmann, Boris, 2003.
"The IS curve and the transmission of monetary policy: Is there a puzzle?,"
ZEI Working Papers
B 13-2003, ZEI - Center for European Integration Studies, University of Bonn.
- Charles Goodhart & Boris Hofmann, 2005. "The IS curve and the transmission of monetary policy: is there a puzzle?," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 29-36.
- Charles Goodhart & Boris Hofmann, 2003. "The IS Curve and the Transmission of Monetary Policy: Is there a Puzzle?," FMG Special Papers sp150, Financial Markets Group.
- Alistair Dieppe & Jerome Henry & Peter Mc Adam, . "Labour market dynamics in the euro area: A model-based sensitivity analysis," Modeling, Computing, and Mastering Complexity 2003 09, Society for Computational Economics.
- Taylor, John B., 1998.
"The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank,"
649, Stockholm University, Institute for International Economic Studies.
- Taylor, John B., 1999. "The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 655-679, June.
- Charles Goodhart, 1998. "Central Bankers and Uncertainty," FMG Special Papers sp106, Financial Markets Group.
- Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Working Papers 01-16, Bank of Canada.
- Juan de Dios Tena & Francesco Giovannoni, 2005.
"Market Concentration, Macroeconomic Uncertainty and Monetary Policy,"
Bristol Economics Discussion Papers
05/576, Department of Economics, University of Bristol, UK.
- Giovannoni, Francesco & de Dios Tena, Juan, 2008. "Market concentration, macroeconomic uncertainty and monetary policy," European Economic Review, Elsevier, vol. 52(6), pages 1097-1123, August.
- Nelson, Edward, 2001.
"UK Monetary Policy 1972-97: A Guide Using Taylor Rules,"
CEPR Discussion Papers
2931, C.E.P.R. Discussion Papers.
- Edward Nelson, 2000. "UK monetary policy 1972-97: a guide using Taylor rules," Bank of England working papers 120, Bank of England.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb).
If references are entirely missing, you can add them using this form.