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Dynamic Responses of the Economy to Monetary Shocks in the United Kingdom

Author

Listed:
  • Bahram Adrangi

    (Pamplin School of Business Administration, University of Portland)

  • Hannah Baade

    (Pamplin School of Business Administration, University of Portland)

  • Kambiz Raffiee

    (College of Business, University of Nevada, Reno, U.S.A.)

Abstract

We study the dynamic responses of key macroeconomic variables to money supply and bank rate shocks in the UK economy. Our study follows Sims (1992) for recent decades that include the financial crisis of 2008. The Bank of England followed the Fed in taking an active role in managing the bank rate in the UK and employed quantitative easing during and post financial crisis in 2008. Our work isolates the structural shocks to the money supply and the bank rate. We examine the impulse responses of the bank rate, exchange rate, prices levels, and the industrial production deploying a structural vector autoregressive model (SVAR). The variance decomposition results and impulse responses from the VECM and SVAR models show that the industrial production is responsive to monetary actions of the Bank of England.

Suggested Citation

  • Bahram Adrangi & Hannah Baade & Kambiz Raffiee, 2019. "Dynamic Responses of the Economy to Monetary Shocks in the United Kingdom," Review of Economics & Finance, Better Advances Press, Canada, vol. 15, pages 31-45, February.
    • Handle: RePEc:bap:journl:190104
    Note: The authors are grateful to the editor and an anonymous referee for their many constructive comments. Remaining errors are authors' responsibility.
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    References listed on IDEAS

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    3. Bahram Adrangi & Arjun Chatrath, 2022. "Dynamic Responses of Major Pacific Rim Emerging Equity Markets to the US Crude Oil Fear Index (OVX)," Bulletin of Applied Economics, Risk Market Journals, vol. 9(1), pages 51-84.

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    More about this item

    Keywords

    Monetary shocks; Bank rate; Structural VAR; UK economy; Impulse responses;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other

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