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Coping With Uncertainty: Historical and Real-Time Estimates Of The Natural Unemployment Rate and The Uk Monetary Policy

  • George Chouliarakis
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    The paper derives and compares historical and real-time estimates of the UK natural unemployment rate and shows that real-time estimates are fraught with noise and should be treated with scepticism. A counterfactual exercise shows that, for most of the 1990s, the Bank of England tracked changes in the natural rate relatively successfully, albeit with some recognition lag which, at times, might have led to excessively cautious policy. A careful scrutiny of the minutes of the monetary policy committee meetings reveals that such ‘cautiousness’ should be taken as evidence of awareness of the real-time informational limitations that monetary policy is facing.

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    File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/cgbcr/discussionpapers/dpcgbcr129.pdf
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    Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 129.

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    Length: 34 pages
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:man:cgbcrp:129
    Contact details of provider: Postal: Manchester M13 9PL
    Phone: (0)161 275 4868
    Fax: (0)161 275 4812
    Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/our-research/centre-for-growth-and-business-cycle-research/

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    1. Edward Nelson & Kalin Nikolov, 2001. "UK inflation in the 1970s and 1980s: the role of output gap mismeasurement," Bank of England working papers 148, Bank of England.
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