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Monetary Frameworks and Institutional Constraints: UK Monetary Policy Reaction Functions, 1985–2003
Author(s) -
Adam Christopher,
Cobham David,
Girardin Eric
Publication year - 2005
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2005.00129.x
Subject(s) - monetary policy , economics , inflation (cosmology) , german , inflation targeting , monetary economics , order (exchange) , exchange rate , independence (probability theory) , function (biology) , identification (biology) , macroeconomics , finance , mathematics , statistics , physics , archaeology , theoretical physics , history , botany , evolutionary biology , biology
Monetary policy reaction functions are estimated for the UK over three periods – 1985–90, 1992–97 and 1997–2003 – in order to disentangle two effects: the switch from an emphasis on exchange rate stabilization to inflation targeting, and the introduction of instrument‐independence in 1997. The external factors considered include US as well as German interest rates, and this leads to the identification of ‘domestic’ and ‘international’ models of the reaction function. The results suggest that it is the changes in the institutional arrangements rather than those in the targeting regime which have been decisive in the development of policy in this period.