Monetary Frameworks and Institutional Constraints: UK Monetary Policy Reaction Functions, 1985-2003

20 Pages Posted: 3 Aug 2005

See all articles by Christopher Scott Adam

Christopher Scott Adam

University of Oxford

David Cobham

Heriot-Watt University - School of Management and Languages

Eric Girardin

University Aix-Marseille 2 - GREQAM

Abstract

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.

Suggested Citation

Adam, Christopher Scott and Cobham, David and Girardin, Eric, Monetary Frameworks and Institutional Constraints: UK Monetary Policy Reaction Functions, 1985-2003. Oxford Bulletin of Economics & Statistics, Vol. 67, No. 4, pp. 497-516, August 2005, Available at SSRN: https://ssrn.com/abstract=764829

Christopher Scott Adam (Contact Author)

University of Oxford ( email )

Oxford
United Kingdom

David Cobham

Heriot-Watt University - School of Management and Languages ( email )

Edinburgh EH14 4AS, Scotland
United Kingdom
+44(0)131 451 3495 (Phone)
+44(0)131 451 3296 (Fax)

HOME PAGE: http://www.sml.hw.ac.uk/Staff_Profiles/DavidCobham.html

Eric Girardin

University Aix-Marseille 2 - GREQAM ( email )

Centre de la Vieille Charité
Marseille, 13 002
France

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