The paper derives the monetary policy reaction function implied by money growth targeting. It consists of an interest rate response to deviations of the inflation rate from target, to the change in the output gap, to money demand shocks and to the lagged interest rate. In the second part, it is...

Papers estimating the reaction function of the Bundesbank generally find that its monetary policy from the 1970s to 1998 can well be captured by a standard Taylor rule according to which the central bank responds to the output gap and to deviations of inflation from target, but not to monetary...

This paper uses a factor-augmented vector autoregressive model (FAVAR) estimated on U.S. data in order to analyze monetary transmission via private sector balance sheets, credit risk spreads and asset markets in an integrated setup and to explore the role of monetary policy in the three...

We estimate forward-looking interest rate reaction functions in the spirit of Taylor (1993) for four major central banks augmented by implicit volatilities of stock market indices to proxy financial market stress. Our results suggest that the Bank of England, the Federal Reserve Bank and the...

On 3 December EY hosted a SUERF conference on banking reform with Sir Howard Davies, the Chairman of RBS, and Dame Colette Bowe, the Chairman of the Banking Standards Board, as the two keynote speakers. Professor David Miles (Imperial College) gave the SUERF 2015 Annual Lecture on Capital and...

We consider the properties of two monetary policy rules ("strict inflation targeting", "constant money growth rule") in an intertemporal equilibrium model with flexible prices in which monetary policy is "active", while fiscal policy is "passive". Specifically, we assume that the fiscal agent...

We analyse the interaction between private agents? uncertainty about inflation target and the central bank's data uncertainty. In our model, private agents update their perceived inflation target and the central bank estimates unobservable economic shocks as well as the perceived inflation...