Operational independence, inflation targeting, and UK monetary policy

Journal of Post Keynesian Economics, 2006, vol. 28, issue 3, pages 395-421

Abstract: This paper evaluates empirically the feedback and stance of monetary policy in the United Kingdom under inflation targeting, implemented since October 1992. Its principal contribution is in comparing two subsamples, before the Bank of England was granted operational independence in May 1997 and after that. We find that the operational independence subperiod has differed from the preindependence one in terms of a weaker response to inflation but stronger sensitivity to the output gap and a less restrictive stance of monetary policy. Such behavior appears justified given the Bank's mandate and the evolution of the business cycle.

Keywords: inflation targeting; monetary policy feedback and stance; operational independence; United Kingdom (search for similar items in EconPapers)
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Working Paper: Operational Independence, Inflation Targeting and UK Monetary Policy (2005)
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