IDEAS home Printed from https://ideas.repec.org/p/shf/wpaper/2011019.html
   My bibliography  Save this paper

Monetary Policy Preferences of the European Monetary Union and the UK

Author

Listed:
  • Philip Arestis
  • Michail Karouglou
  • Kostas Mouratidis

    () (Department of Economics, The University of Sheffield)

Abstract

This paper estimates central bank policy preferences in the case of the European Monetary Union and of the UK. We do so, by adopting the framework suggested by Cecchetti and Ehrmann (1999), which, however, we extent in two respects. First, we allow policy preferences to be asymmetric by assuming that inflation and output follow a Markov process. Second, following Bean (1998) we introduce dynamics in the supply and demand relationships. In doing so we estimate state-dependent policy frontiers. Empirical results from the static model show that monetary policy in the European Monetary Union and in the UK put a lot of weight on price stability. However, there is evidence of 'price puzzle' especially in the high volatility regime. The price puzzle might be the by-product of frequent realignments in the European Monetary System currency crises in 1992, 1993 and 1995 and of the more recent 2008 financial crisis. Estimates of the optimal policy frontier suggest that although the UK enjoys higher anti-inflatonary credibility, it also faces a higher trade-off between inflation and output variability than the European Monetary Union.

Suggested Citation

  • Philip Arestis & Michail Karouglou & Kostas Mouratidis, 2011. "Monetary Policy Preferences of the European Monetary Union and the UK," Working Papers 2011019, The University of Sheffield, Department of Economics.
  • Handle: RePEc:shf:wpaper:2011019
    as

    Download full text from publisher

    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_019.html
    File Function: First version, 2011
    Download Restriction: no

    References listed on IDEAS

    as
    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    2. Nora Lustig, 2001. "Life Is Not Easy: Mexico's Quest for Stability and Growth," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 85-106, Winter.
    3. Francine D. Blau & Lawrence M. Kahn, 2006. "The U.S. Gender Pay Gap in the 1990S: Slowing Convergence," ILR Review, Cornell University, ILR School, vol. 60(1), pages 45-66, October.
    4. Robert Breunig & Sandrine Rospabe, 2005. "Parametric vs. semi-parametric estimation of the male-female wage gap: An application to France," ANU Working Papers in Economics and Econometrics 2005-458, Australian National University, College of Business and Economics, School of Economics.
    5. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    6. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
    7. Ernesto Aguayo-Tellez & Jim Airola & Chinhui Juhn & Carolina Villegas-Sanchez, 2014. "Did Trade Liberalization Help Women? the Case of Mexico in the 1990s," Research in Labor Economics,in: New Analyses of Worker Well-Being, volume 38, pages 1-35 Emerald Publishing Ltd.
    8. Jenkins, Stephen P., 1994. "Earnings discrimination measurement : A distributional approach," Journal of Econometrics, Elsevier, vol. 61(1), pages 81-102, March.
    9. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    10. Wood, Robert G & Corcoran, Mary E & Courant, Paul N, 1993. "Pay Differences among the Highly Paid: The Male-Female Earnings Gap in Lawyers' Salaries," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 417-441, July.
    11. David Neumark, 1988. "Employers' Discriminatory Behavior and the Estimation of Wage Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 279-295.
    12. Blau, Francine D & Ferber, Marianne A, 1987. "Discrimination: Empirical Evidence from the United States," American Economic Review, American Economic Association, vol. 77(2), pages 316-320, May.
    13. Javier Gardeazabal & Arantza Ugidos, 2005. "Gender wage discrimination at quantiles," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(1), pages 165-179, July.
    14. Pagan, Jose A & Sanchez, Susana M, 2000. "Gender Differences in Labor Market Decisions: Evidence from Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 619-637, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2011019. 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: (Jacob Holmes). General contact details of provider: http://edirc.repec.org/data/desheuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.