Politics and the UK's monetary policy

Fang‐Shuo Chang, Shiu-Sheng Chen and Po‐Yuan Wang

Scottish Journal of Political Economy, 2020, vol. 67, issue 5, 486-522

Abstract: This paper examines whether politics causes regime shifts in deviations from the optimal monetary policy in the United Kingdom. After using a dynamic stochastic general equilibrium model to construct the welfare‐maximizing policy rule and deviations from the optimal Taylor rule, we show that politics does indeed play an important role in explaining these deviations. In addition to politics, unemployment rates account for regime shifts in the Taylor rule deviations.

Date: 2020
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https://doi.org/10.1111/sjpe.12256

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Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:67:y:2020:i:5:p:486-522

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