Monetary information and monetary policy decisions: Evidence from the euroarea and the UK
Tae-Hwan Kim () and
Paul Mizen ()
Journal of Macroeconomics, 2012, vol. 34, issue 2, 326-341
This paper uses a modified New Keynesian framework to consider the use of monetary information in making monetary policy decisions. We add monetary indicators derived from theoretical models to conventional economic variables in an instrument rule and estimate the equations using euroarea and UK data recognizing that interest rates are set discretely. There is an improvement in the ability to predict changes in interest rates when we introduce monetary indicators which is robust to alternative model specifications. This result adds to a growing literature on the role of monetary indicators showing that this information helps predict interest rate decisions as well as inflation.
Keywords: Monetary policy rules; Money; Quantity theory; European Central Bank; Bank of England (search for similar items in EconPapers)
JEL-codes: E31 E41 E43 E52 E58 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:2:p:326-341
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