Asymmetries in Bank of England Monetary Policy

Jamie Gascoigne and Paul Turner ()

No 2003007, Working Papers from The University of Sheffield, Department of Economics

Abstract: In this paper we estimate limited dependent variable models for Bank of England monetary policy using monthly data over the period June 1997 to March 2003. During this period the Bank has had operational independence to set the interest rate in order to meet the inflation target set by the Government. We find evidence that the Bank has responded to current output growth rather than inflation which is consistent with targeting future inflation when there is a lag in the response of inflation to the output gap. We also find evidence of an asymmetry in the sense that the link between the interest rate and output growth is stronger when an increase in the interest rate is required than when circumstances dictate it should be cut. On the other hand there is considerably more inertia for interest rate cuts in the sense that a cut in the rate in one month significantly increases the probability of a cut in the next month which is not the case for increases.

Keywords: Monetary policy reaction functions; Central Bank independence; binary choice models. (search for similar items in EconPapers)
JEL-codes: C25 E43 E58 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2003-08, Revised 2003-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Asymmetries in Bank of England monetary policy (2004)
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