The British opt-out from the European Monetary Union: empirical evidence from monetary policy rules

Stefano d'Addona and Ilaria Musumeci
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Ilaria Musumeci: Department of International Studies, University of Rome 3

No 225, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We analyze the current state of monetary integration in Europe, focusing on the United Kingdom’s position regarding the European Monetary Union (EMU). The interest rate decisions of the European Central Bank and the Bank of England are compared through different specifications of the Taylor rule. Comparison of the monetary conduct of these two institutions provides useful guidance in identifying the differences that the British Government claims motivating its refusal to join the EMU. Testing for forward-looking behavior and possible asymmetries in policy responses, we show evidence supporting the opt-out decision taken by the British Government.

Keywords: Taylor rule; European monetary integration; Regime switching models; Interest rate smoothing (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-03-26, Revised 2012-03-26
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Journal Article: The British opt-out from the European Monetary Union: empirical evidence from monetary policy rules (2013)
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