Skip Navigation


Oxford Economic Papers Advance Access originally published online on April 24, 2006
Oxford Economic Papers 2006 58(4):706-721; doi:10.1093/oep/gpl009
This Article
Right arrow Full Text
Right arrow Full Text (PDF)
Right arrow All Versions of this Article:
58/4/706    most recent
gpl009v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Srinivasan, N.
Right arrow Articles by Ramachandran, M.
Right arrow Search for Related Content
Related Collections
Right arrow E31 - Price Level; Inflation; Deflation
Right arrow E37 - Forecasting and Simulation
Right arrow E52 - Monetary Policy (Targets, Instruments, and Effects)
Right arrow E58 - Central Banks and Their Policies
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© Oxford University Press 2006 All rights reserved

UK monetary policy under inflation forecast targeting: is behaviour consistent with symmetric preferences?

Naveen Srinivasan*,, Vidya Mahambare{dagger}, and M. Ramachandran{ddagger}

*Cardiff Business School, Cardiff University, Colum Drive, Cardiff CF10 3EU, UK
{dagger}Cardiff Business School, Cardiff University
{ddagger}Institute for Social and Economic Change, Bangalore, India

Correspondence: e-mail: SrinivasanNK{at}cardiff.ac.uk

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.

Key Words: JEL classifications: E52 • E58


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.