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Inflation Targeting in the United Kingdom: Information Content of Financial and Monetary Variables

Author

Listed:
  • Josef Baumgartner
  • Mr. Ramana Ramaswamy

Abstract

The main objective of this paper is to identify a set of leading indicators of inflation for the United Kingdom, and discuss the conceptual issues pertaining to inflation targeting. The main conclusions are that narrow money has strong leading indicator properties for inflation, while broad money does not. Long yields appear to have some information for the GDP deflator, and headline inflation, and short yields for underlying inflation. Spreads between commercial paper and gilts, and the yield curve, have very little predictive information on inflation. An interesting conclusion is that while the nominal effective exchange rate is not a good predictor of inflation, the sterling-deutsche mark exchange rate appears to have weak predictive information on the targeted measure of inflation.

Suggested Citation

  • Josef Baumgartner & Mr. Ramana Ramaswamy, 1996. "Inflation Targeting in the United Kingdom: Information Content of Financial and Monetary Variables," IMF Working Papers 1996/044, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/044
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    Citations

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    Cited by:

    1. Maria Soledad Martinez Peria, 2002. "The Impact of Banking Crises on Money Demand and Price Stability," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 1-1.
    2. Csermely, Ágnes, 1997. "Az inflációs célkitűzés rendszere [Inflation targeting]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 233-253.
    3. Henry Muganza Ngongo, 2015. "Les indicateus avancés de l'inflation en RDCongo," Post-Print hal-01202369, HAL.
    4. Henry Ngongo, 2015. "Les indicateus avanc\'es de l'inflation en RDCongo," Papers 1509.06504, arXiv.org.
    5. Fatith Ozatay, 2002. "Effects of contemporaneous aggregation on the predictive power of information variables," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 339-342.
    6. Palle S. Andersen, 1997. "Forecast errors and financial developments," BIS Working Papers 51, Bank for International Settlements.

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