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Monetary Policy in an Uncertain World

Author

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  • Charles Bean

Abstract

In this article, Charles Bean, Bank of England Chief Economist and member of the Monetary Policy Committee, reviews and assesses the three types of uncertainty which affect monetary policymakers: uncertainty about the data; uncertainty about the nature and persistence of shocks; and uncertainty about the structure of the economy. Focusing on uncertainty about the structure of the economy, he notes the unusual stability of inflation and output growth in the past decade or so. There are a number of possible explanations, including plain good luck, structural changes in the economy and improved policymaking. The author goes on to note that the short-run trade-off between inflation and activity seems to have flattened as inflation has stabilised at low levels and he attributes this in part to improved monetary policymaking. He goes on to consider some of the policy implications of this change.

Suggested Citation

  • Charles Bean, 2005. "Monetary Policy in an Uncertain World," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(1), pages 31-53, January.
    • Handle: RePEc:wej:wldecn:199
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    File URL: https://www.worldeconomics.com/Journal/Papers/Article.details?ID=199
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    Cited by:

    1. Lavan Mahadeva & Alex Muscatelli, 2005. "National Accounts Revisions and Output Gap Estimates in a Model of Monetary Policy with Data Uncertainty," Discussion Papers 14, Monetary Policy Committee Unit, Bank of England.
    2. Gabriele Galati & William R. Melick, 2006. "The evolving inflation process: an overview," BIS Working Papers 196, Bank for International Settlements.
    3. Iris Biefang-Frisancho Mariscal & Peter Howells, 2007. "Monetary Policy Transparency in the UK: The Impact of Independence and Inflation Targeting," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(5), pages 603-617.
    4. Kenjiro Suzuki & Yasunori Okabe & Takaaki Fujii, 2006. "On a Non-linear Risk Analysis for Stock Market Indexes," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 13(3), pages 235-258, September.
    5. Pierre Gosselin & Aileen Lotz & Charles Wyplosz, 2009. "Interest Rate Signals and Central Bank Transparency," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 9-51, National Bureau of Economic Research, Inc.
    6. Edward Nelson, 2009. "An Overhaul of Doctrine: The Underpinning of UK Inflation Targeting," Economic Journal, Royal Economic Society, vol. 119(538), pages 333-368, June.
    7. Adam, Christopher & Cobham, David, 2009. "Using Real-Time Output Gaps to Examine Past and Future Policy Choices," National Institute Economic Review, National Institute of Economic and Social Research, vol. 210, pages 98-110, October.
    8. Alex Cukierman, 2009. "The Limits of Transparency," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 38(1‐2), pages 1-37, February.
    9. Silke Tober & Tobias Zimmermann, 2009. "Monetary policy and commodity price shocks," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 44(4), pages 231-237, July.
    10. Lucas Papademos, 2007. "The Effects of Globalization on Inflation, Liquidity and Monetary Policy," NBER Chapters, in: International Dimensions of Monetary Policy, pages 593-608, National Bureau of Economic Research, Inc.
    11. Bianchi, Francesco & Mumtaz, Haroon & Surico, Paolo, 2009. "The great moderation of the term structure of UK interest rates," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 856-871, September.
    12. Bernard Hodgetts, 2006. "Changes in the inflation process in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 1-30., March.
    13. Lee, Jiho, 2012. "Are structural parameters of DSGE models stable in Korea?," Journal of Asian Economics, Elsevier, vol. 23(1), pages 50-59.

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