The Cost of Political Intervention in Monetary Policy
AbstractData from a unique monetary 'experiment' conducted in the UK during the period 1994-97 are used to investigate the cost of political intervention in monetary policy. The paper finds that the difference between government bond yields in Germany (but not the US) and the UK was systematically related to an index of the credibility of monetary policy constructed on the basis of the frequency of agreements / disagreements between the Minister of Finance who took the decisions on interest rates and the Bank of England, whose recommendations were published with a lag, with disagreements causing an increase in the yield differential.
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Bibliographic InfoPaper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 0114.
Date of creation: Dec 2001
Date of revision:
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Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
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Web page: http://www.st-andrews.ac.uk/economics/
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Other versions of this item:
- David Cobham & Athanasios Papadopoulos & George Zis, 2004. "The Cost of Political Intervention in Monetary Policy," International Finance, Wiley Blackwell, vol. 7(3), pages 471-493, December.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-10 (All new papers)
- NEP-MON-2002-02-15 (Monetary Economics)
- NEP-PKE-2002-02-15 (Post Keynesian Economics)
- NEP-POL-2002-02-15 (Positive Political Economics)
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