Realised and Optimal Monetary Policy Rules in an Estimated Markov-Switching DSGE Model of the United Kingdom

Xiaoshan Chen and Ronald MacDonald

No 2011-21, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: This paper investigates underlying changes in the UK economy over the past thirtyfive years using a small open economy DSGE model. Using Bayesian analysis, we find UK monetary policy, nominal price rigidity and exogenous shocks, are all subject to regime shifting. A model incorporating these changes is used to estimate the realised monetary policy and derive the optimal monetary policy for the UK. This allows us to assess the effectiveness of the realised policy in terms of stabilising economic fluctuations, and, in turn, provide an indication of whether there is room for monetary authorities to further improve their policies.

Keywords: Markov-switching; Bayesian analysis; DSGE models (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Realized and Optimal Monetary Policy Rules in an Estimated Markov-Switching DSGE Model of the United Kingdom (2012)
Journal Article: Realized and Optimal Monetary Policy Rules in an Estimated Markov‐Switching DSGE Model of the United Kingdom (2012)
Working Paper: Realised and Optimal Monetary Policy Rules in an Estimated Markov-Switching DSGE Model of the United Kingdom (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:262

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