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Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom

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  • Hossein Samiei
  • Jan Kees Martijn

Abstract

The U.K. monetary policy framework, which combines inflation targeting with operational independence, provides a suitable arrangement for focused and credible monetary policy. However, potential weaknesses could result from features that have not yet been fully tested: the credibility and transparency of the inflation forecasts, which form the core of policy decisions, have diminished as a result of independence; and the framework could encourage excessive activism and frequent changes in interest rates. Although policy coordination could also suffer from independence, the new partly rules-based fiscal and monetary regimes will promote overall macroeconomic stability.

Suggested Citation

  • Hossein Samiei & Jan Kees Martijn, 1999. "Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom," IMF Working Papers 99/170, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/170
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    References listed on IDEAS

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    3. Artis, Michael J & Mizen, Paul & Kontolemis, Zenon, 1998. "Inflation Targeting: What Can the ECB Learn from the Recent Experience of the Bank of England?," Economic Journal, Royal Economic Society, vol. 108(451), pages 1810-1825, November.
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    5. Posen, Adam, 1998. "Central Bank Independence and Disinflationary Credibility: A Missing Link?," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 335-359, July.
    6. Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May.
    7. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, January.
    8. Goodhart, Charles A E & Huang, Haizhou, 1998. "Time Inconsistency in a Model with Lags, Persistence, and Overlapping Wage Contracts," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 378-396, July.
    9. Clive Briault & Andrew Haldane & Mervyn King, 1996. "Independence and Accountability," Bank of England working papers 49, Bank of England.
    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. Blake, Andrew P & Weale, Martin, 1998. "Costs of Separating Budgetary Policy from Control of Inflation: A Neglected Aspect of Central Bank Independence," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 449-467, July.
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    13. Guy Debelle, 1996. "Central Bank Independence; A Free Lunch?," IMF Working Papers 96/1, International Monetary Fund.
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    Cited by:

    1. Michal Skorepa & Viktor Kottlan, 2003. "Assessing future inflation in inflation targeting: forecasts or simulations?," BIS Papers chapters,in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 147-157 Bank for International Settlements.
    2. Leitemo, Kai, 2003. " Targeting Inflation by Constant-Interest-Rate Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 609-626, August.
    3. Charles A.E. Goodhart, 2001. "Monetary transmission lags and the formulation of the policy decision on interest rates," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 165-186.
    4. Michal Skořepa & Viktor Kotlán, 2006. "Inflation Targeting: To Forecast or To Simulate?," Prague Economic Papers, University of Economics, Prague, vol. 2006(4), pages 300-314.
    5. Frederic S Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," RBA Annual Conference Volume,in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
    6. Malcolm Edey, 2006. "An Australian perspective on inflation targeting, communication and transparency," BIS Papers chapters,in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 3-24 Bank for International Settlements.
    7. Malcolm Edey & Andrew Stone, 2004. "A Perspective on Monetary Policy Transparency and Communication," RBA Annual Conference Volume,in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.

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