Modelling The Discrete And Infrequent Official Interest Rate Change In The Uk
AbstractThis paper is an empirical analysis of the manner in which official interest rates are determined by the Bank of England. We use a nonlinear framework that allow for the separate study of factors affecting the magnitude of positive and negative interest rate changes as well as their probabilities. Using this approach, new kinds of monetary shocks are defined and used to evaluate their impact on the UK economy. Among them, unanticipated negative interest rate changes are especially important. The model generalizes previous approaches in the literature and provides a rich methodology to understand central banks’ decisions and their consequences.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws062007.
Date of creation: Apr 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-CBA-2006-11-18 (Central Banking)
- NEP-MAC-2006-11-18 (Macroeconomics)
- NEP-MON-2006-11-18 (Monetary Economics)
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