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Report
What was the market's view of U.K. monetary policy? Estimating inflation risk and expected inflation with indexed bonds
A measure of the credibility of monetary policy is the inflation risk premium in nominal yields. This will be time varying and can be estimated by combining the information in the nominal term structure with that in the real term structure. We estimate these risk premia using a generalized CIR affine-yield model, with one factor driving the real term structure of monthly observations on two-year, five-year and ten-year UK index-linked debt and two factors driving the term structure of the corresponding nominal yields. Our estimates show that the inflation risk premium contributes on average ...
Journal Article
Inflation measurement and inflation targets: the UK experience
Journal Article
Inflation targeting: lessons from four countries
In recent years, a number of central banks have chosen to orient their monetary policy toward the achievement of numerical inflation targets. This study examines the experience of the first three countries to adopt an inflation-targeting strategy--New Zealand, Canada, and the United Kingdom. It also considers the German experience with a monetary targeting scheme that incorporated many elements of inflation targeting even earlier. The authors find that the countries adopting a numerical inflation target have successfully maintained low inflation rates. Other benefits of inflation targeting ...
Working Paper
The term structure of inflation compensation in the nominal yield curve
We propose a DSGE model with regime switching in the central bank?s inflation target to explain inflation compensation in the UK. Taking advantage of the well-documented change in UK monetary policy to adopt inflation targeting, we estimate our model using nominal and inflation-linked Treasury bond data from the UK from 1985 to 2007. We find that this model can account for the term structure of inflation compensation in the nominal yield curve by generating regime-dependent conditional expectations of future inflation.
Journal Article
Monetary policy without reserve requirements : case studies and options for the United States
Over the past decade, the level of required balances held by depository institutions in the United States has declined dramatically. The decline in reserve balances has fueled a debate over the role of reserve requirements. On the one hand, proponents of reserve requirements argue that low reserve balances may complicate monetary policy operations and increase short-term interest rate volatility. On the other hand, critics of reserve requirements argue that lower reserve requirements remove a distortionary tax on depository institutions and need not complicate monetary policy operations. ; In ...
Conference Paper
The demand for liquid assets in Germany and the United Kingdom
Conference Paper
Monetary transmission channels in major foreign industrial countries
Journal Article
The Bank of England's monetary policy
As the second oldest and perhaps the most renowned central bank, the Bank of England could provide some important insights into issues that may confront the Federal Reserve System in the future.
Working Paper
An overhaul of doctrine: the underpinning of U.K. inflation targeting
This paper argues that the inflation targeting regime prevailing in the United Kingdom is not the result of a change in policymaker objectives. By conducting an analysis of U.K. policymakers that parallels Romer and Romer?s (2004) study of Federal Reserve Chairmen, I demonstrate that policymaker objectives have been essentially unchanged over the past five decades. Instead, the crucial underpinning of U.K. inflation targeting has been an overhaul of doctrine?a changed view of the transmission mechanism. This overhaul can be understood in terms of changes in policymakers? views on the values ...
Working Paper
An admissible monetary aggregate for the United Kingdom