Modelling Monetary Policy: Inflation Targeting in Practice
AbstractThis paper estimates a simple structural model of monetary policy in the UK for 1963-2000, focusing on the policy of inflation targeting introduced in 1992. Our main findings are: i) the adoption of inflation targets led to significant changes in monetary policy giving greater weight to inflation; (ii) monetary policy post-1992 is asymmetric as policy makers respond more to upward deviation of inflation away from the target; (iii) in the post-1992 period policymakers may be attempting to keep inflation within the range of 1.4%-2.6% rather than pursuing a point target of 2.5%; (iv) monetary policy is more responsive to inflation when it is further from the target.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 137.
Date of creation: 29 Aug 2002
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Other versions of this item:
- Christopher Martin & Costas Milas, 2004. "Modelling Monetary Policy: Inflation Targeting in Practice," Economica, London School of Economics and Political Science, vol. 71(281), pages 209-221, 05.
- NEP-ALL-2002-07-08 (All new papers)
- NEP-CBA-2002-07-08 (Central Banking)
- NEP-MON-2002-07-08 (Monetary Economics)
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