 UK monetary policy under inflation forecast targeting: is behaviour consistent with symmetric preferences?Naveen Srinivasan, Vidya Mahambare () and M Ramachandran () Oxford Economic Papers, 2006, vol. 58, issue 4, 706-721 Abstract: This paper examines how the Bank of England conducts monetary policy in practice and assesses its policy preferences. Our empirical results using monthly ex post inflation forecast suggest that pursued policy can be characterized by a nonlinear policy reaction function with a deflation bias. We also find evidence of a target range as opposed to a point target for the 1992--5 period. These results are however, not robust to the use of the Bank's own forecast which suggests that pursued policy is consistent with a symmetric point target for inflation. In practice however, inflation has been consistently below the Bank's inflation target in recent years. We argue that a plausible explanation for this is that the MPC had systematically over predicted inflation, which in turn may have resulted in overly restrictive policy. Copyright 2006, Oxford University Press. Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:58:y:2006:i:4:p:706-721 Ordering information: This journal article can be ordered from Access Statistics for this article Oxford Economic Papers is currently edited by James Forder and Francis J. Teal More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. |
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