The New UK Monetary Arrangements: A View from the Literature
This paper considers the likely operating characteristics of the new UK monetary arrangements introduced in May 1997. The paper first argues that the time inconsistency of policy is not an issue provided the Bank of England is properly independent. However, the current inflation remit from the Chancellor to the Bank specifies a numerical target for the inflation rate, but does not specify how quickly deviations from the target are to be corrected. It is thus an incomplete contract, and there is a danger that the Bank may choose to stabilize inflation at the cost of excessively volatile movements in output, or vice versa. The author estimates the optimal policy frontier for the UK economy and show that in practice it is close to rectangular. Consequently all the Bank needs to assume is that the government's preferences are 'reasonable' in order to know approximately where to locate on this frontier; the incompleteness of the remit therefore need not be a cause for concern.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 108 (1998)
Issue (Month): 451 (November)
|Contact details of provider:|| Postal: 2 Dean Trench Street, Westminster, SW1P 3HE|
Phone: +44 20 3137 6301
Web page: http://www.res.org.uk/
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishers.co.uk/asp/journal.asp?ref=0013-0133|
When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:108:y:1998:i:451:p:1795-1809. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.