The most popular simple rule for the interest rate, due to Taylor (1993a) is meant to inform monetary policy in economies that are closed. On the other hand, its main open economy alternative, i.e. Ball's (1999) rule based on a Monetary Conditions Index (MCI), may perform poorly in the face of...

The most popular simple rules, due to Taylor (1993) and McCallum (1995), are both meant to inform monetary policy in economies that are closed. On the other hand, their main open economy alternative, the Monetary Conditions Index (MCI) rule of Ball (1999) is flawed for a number or reasons, not...

The popular Taylor rule is meant to inform monetary policy in economies that are closed. Its main open-economy alternative, i.e., Ball's (In: J.B. Taylor (Ed.), Monetary Policy Rules, University of Chicago Press, Chicago) rule based on a Monetary Conditions Index, cannot offer guidance for the...

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 volatility of inflation and output has fallen in most advanced economies in the 1990s and 2000s. We use a monetary overlapping generations model to discuss the cause and durability of this macroeconomic change. In that model, agents' decision rules require them to make forecasts of future...

This paper introduces the Bank of England's new forecasting platform and provides examples of how it can be applied to practical forecasting problems. The platform consists of four components: COMPASS, a structural central organising model; a suite of models, used to fill in the gaps in the...

This paper explores the effects of measurement error on dynamic forecasting models. The paper sets out to illustrate a trade off that confronts forecasters and policymakers when they use data that are measured with error. On the one hand, observations on recent data give valuable clues as to the...

We investigate the extent to which misperceptions about the economy can become self-reinforcing and thereby contribute to time-varying macroeconomic dynamics. To do so, we build a New Keynesian model with long-horizon expectations and dynamic predictor selection. Because agents solve...

This paper outlines the properties of one of the models used at the Bank of England for analysing the impact of energy prices on the UK economy. We build a dynamic general equilibrium model that includes a variety of channels through which energy prices affect demand and supply. On the demand...