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Deflation Probability and the Scope for Monetary Loosening in the United Kingdom

Alex Haberis, Riccardo M. Masolo and Kate Reinold
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Alex Haberis: Bank of England, Centre for Macroeconomics, London

International Journal of Central Banking, 2019, vol. 15, issue 1, 233-277

Abstract: We use an estimated DSGE model of the U.K. economy to investigate perceptions of the scope for monetary loosening since the 2007-08 financial crisis. We simulate our model under alternative assumptions about the constraints on monetary policy and compare the implied deflation probabilities with those expected by professional forecasters, financial markets (from options prices), and policymakers. We find that these real-time, external estimates of deflation probability are consistent with policy not having been perceived to have been constrained since the crisis.

JEL-codes: E31 E37 E43 E47 E52 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Deflation probability and the scope for monetary loosening in the United Kingdom (2016) Downloads
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Handle: RePEc:ijc:ijcjou:y:2019:q:1:a:6