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Inflation Targeting: The UK Experience

I first review the background to the adoption of an inflation target in 1992 and the subsequent development of the regime, in particular the delegation of operational responsibility for monetary policy to the Bank of England in 1997 and the associated institutional framework. I then go on to explain some aspects of the way the MPC formulates and conducts policy at the Bank, relating it to some of the burgeoning literature on inflation targeting. I next review some aspects of performance since the Bank's independence. I conclude with a discussion of the topical question of how monetary policy should respond to asset price booms and high rates of debt accumulation. Copyright Verein für Socialpolitik und Blackwell Publishers Ltd, 2004

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Article provided by Verein für Socialpolitik in its journal Perspektiven der Wirtschaftspolitik.

Volume (Year): 5 (2004)
Issue (Month): 4 (November)
Pages: 405-421

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Handle: RePEc:bla:perwir:v:5:y:2004:i:4:p:405-421
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  1. Svensson, Lars E O, 1996. "Price-level Targeting versus Inflation Targeting: A Free Lunch?," CEPR Discussion Papers 1510, C.E.P.R. Discussion Papers.
  2. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  3. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  4. Svensson, Lars E.O., 1997. "Inflation Targeting: Some Extensions," Seminar Papers 625, Stockholm University, Institute for International Economic Studies.
  5. Gruen, David & Plumb, Michael & Stone, Andrew, 2005. "How Should Monetary Policy Respond to Asset-Price Bubbles?," MPRA Paper 833, University Library of Munich, Germany.
  6. Stephen G. Cecchetti & Hans Genberg & Sushil Wadhwani, 2002. "Asset Prices in a Flexible Inflation Targeting Framework," NBER Working Papers 8970, National Bureau of Economic Research, Inc.
  7. Charles Bean, 2003. "Asset prices, financial imbalances and monetary policy: are inflation targets enough?," BIS Working Papers 140, Bank for International Settlements.
  8. Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
  9. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  10. Bean, Charles, 1998. "The New UK Monetary Arrangements: A View from the Literature," Economic Journal, Royal Economic Society, vol. 108(451), pages 1795-1809, November.
  11. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Interest-Rate Rules: II. Applications," NBER Working Papers 9420, National Bureau of Economic Research, Inc.
  12. Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2004. "Has Monetary Policy Become More Efficient? A Cross Country Analysis," NBER Working Papers 10973, National Bureau of Economic Research, Inc.
  13. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
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