External Influences and Institutional Constraints on UK Monetary Policy, 1985-2000
We examine the role and nature of external influences (US as well as German) and changing institutional constraints upon UK monetary policy by estimating Taylor-type reaction functions for three subperiods: 1985-90 (pre-ERM), 1992-97 (post-ERM) and 1997-2000 (MPC). We identify and contrast 'domestic' and 'international' models of the reaction function, and show that while the international model dominates for the first subperiod, a joint model dominates for the post-ERM, and a domestic model in which foreign interest rates function only as instruments dominates for the MPC period. We use these models to comment on the short ERM period, when the authorities reduced interest rates further and faster than they would have done on the basis of the pre-ERM rule, but less than on the post-ERM or MPC (or standard Taylor) rules. We interpret our findings as showing that it is the institutional changes (towards central bank independence) rather than changes in the external regime which have been decisive in the development of UK monetary policy in this period.
|Date of creation:||15 Dec 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 01334 462420
Fax: 01334 462444
Web page: http://www.st-andrews.ac.uk/economics/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicoletta Batini & Andrew Haldane, 1999.
"Forward-Looking Rules for Monetary Policy,"
in: Monetary Policy Rules, pages 157-202
National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:san:wpecon:0116. 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: (the School of Economics)
If references are entirely missing, you can add them using this form.