This paper investigates the problem of selecting an optimal horizon for inflation targeting in the United Kingdom. There are two key ways of thinking about an optimal horizon, so the paper looks at optimal horizons for both of these interpretations. In addition, to see whether the results are...

This paper reports an investigation of the effects of additive and multiplicative uncertainty upon the stabilisation properties of a simple base money rule for monetary policy. Using a five-equation empirical model of the United Kingdom, it is shown that changes in the extent of additive...

This paper evaluates a class of simple policy rules that feed back from expected values of future inflation--inflation forecast-based rules. The rules are assessed by how well they perform when the economy is buffeted by a combination of shocks, whose distribution is drawn from the Bank of...

The most popular simple rule for the interest rate, due to Taylor, is meant to inform monetary policy in closed economies. On the other hand, its main open-economy alternative, Ball's rule based on a monetary conditions index (MCI), may perform poorly in the face of specific types of exchange...

The previous literature on the benefits of price level versus inflation targeting has, with some qualifications, established that price level targeting entails lower price level variance at the expense of higher inflation and output variance. This paper investigates the properties of monetary...

A long-standing area of research and policy interest is the construction of a measure of monetary policy stance. One measure that has been proposed, as an alternative to indices that employ monetary aggregates or exchange rates, is the spread between the actual real interest rate and its...

The volatile data for inflation, output, and interest rates in the United Kingdom prior to the 1990s, and the relative macroeconomic stability associated with inflation targeting, provide a rich basis for discriminating between rival explanations for the outbreak of stagflation. Alternative...

Understanding the degree of measurement error in the estimates of the output gap available to policy-makers in 'real time' is important both for the formulation of monetary policy and for the study of inflation behaviour. For the United Kingdom, no official output gap series exists, but an...

Meltzer (1999a) shows that real monetary base growth is a significant determinant of consumption growth in the United States, controlling for the short-term real interest rate. In this paper, it is shown that the same property of base money holds for total output (relative to trend or potential)...

This paper estimates simple interest rate reaction functions or 'Taylor rules' for different UK monetary policy regimes. In the period between the floating of sterling in June 1972 and the Bank of England receiving operational independence in May 1997, UK monetary policy went through several...