Institutional Design, Macroeconomic Policy Coordination and Implications for the Financial Sector in the UK

Muhammad Ali Nasir, Milton Yagob, Alaa Solimanc and Junjie Wud
Additional contact information
Milton Yagob: Faculty of Business & Law, Leeds Beckett University, UK
Alaa Solimanc: Faculty of Business & Law, Leeds Beckett University, UK
Junjie Wud: Faculty of Business & Law, Leeds Beckett University, UK

Journal of Central Banking Theory and Practice, 2017, vol. 6, issue 3, 95-126

Abstract: This study has analysed the implications of institutional design of macroeconomic policy making institutions for the macroeconomic policy interaction and financial sector in the United Kingdom. Employing a Vector Error Correction (VEC) model and using monthly data from January 1985 to August 2008 we found that the changes in institutional arrangement and design of policy making authorities appeared to be a major contributing factor in dynamics of association between policy coordination/combination and financial sector. It was also found that the independence of the Bank of England (BoE) and withdrawal from the Exchange Rate Mechanism led to the increase in macroeconomic policy maker’s ability to coordinate and restore financial stability. The results imply that although institutional autonomy in the form of instrument independence (monetary policy decisions) could bring financial stability, there is a strong necessity for coordination, even in Post-MPC (Monetary Policy Committee) and the BoE independence.

Keywords: Macroeconomic Policy Interaction; Institutional Design; Financial Markets; Policy Coordination; Central Bank Independence. (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.cbcg.me/repec/cbk/journl/vol6no3-5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:6:y:2017:i:3:p:95-126

Access Statistics for this article

More articles in Journal of Central Banking Theory and Practice from Central bank of Montenegro Contact information at EDIRC.
Bibliographic data for series maintained by ().