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The Cost of Political Intervention in Monetary Policy

David Cobham (), Athanasios Papadopoulos () and George Zis
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George Zis: Manchester Metropolitan

No 200114, Discussion Paper Series, School of Economics and Finance from School of Economics and Finance, University of St Andrews

Abstract: Data from a unique monetary 'experiment' conducted in the UK during the period 1994-97 are used to investigate the cost of political intervention in monetary policy. The paper finds that the difference between government bond yields in Germany (but not the US) and the UK was systematically related to an index of the credibility of monetary policy constructed on the basis of the frequency of agreements / disagreements between the Minister of Finance who took the decisions on interest rates and the Bank of England, whose recommendations were published with a lag, with disagreements causing an increase in the yield differential.

Keywords: monetary policy; time-inconsistency; credibility. (search for similar items in EconPapers)
JEL-codes: E5 (search for similar items in EconPapers)
Date: 2001-12-15
New Economics Papers: this item is included in nep-mon, nep-pke and nep-pol
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