There is a considerable academic literature on the relationship between Central Bank independence and inflation but the issue of Central Bank accountability and its effect of inflation performance has received very little attention. This paper looks at the issue of accountability in a simple...

Dynamic stochastic general equilibrium (DSGE) models have begun to dominate the field of macroeconomic theory and policy-making. These models describe the evolution of macroeconomic activity as a recursive sequence of outcomes based upon the optimal decision rules of rational households, firms...

Central bank independence is widely thought be a sine qua non of a credible commitment to price stability. The surprise decision by the UK government to grant operational independence to the Bank of England in 1997 affords us a natural experiment with which to gauge the impact on the yield curve...

We develop two variants of an open economy general equilibrium model employing Blanchard-Yaari life overlapping generations, which are shown to capture a number of important aspects of the UK economic cycle. We analyse the equilibrium stochastic processes of the model’s endogenous variables in...

This paper examines the implications of the expectations theory of the term structure for the implementation of inflation targeting. We show that the term structure weakens the transmission of short-term interest rates to ultimate policy objectives. Therefore, short term interest rates in the...

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. We find that under flexible inflation targeting and uncertainty in the degree of persistence in the economy, allowing for active learning possibilities has effects on the...

We employ an expectations augmented Phillips curve framework to investigate the link between inflation, unit labour costs, the output gap, the real exchange rate and inflation expectations. Using multivariate cointegration techniques, we find evidence consistent with mark-up behaviour of output...