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Monetary policy transparency in the UK: The impact of independence and inflation targeting

Mariscal, Iris Biefang Frisancho; Biefang-Frisancho Mariscal, Iris; Howells, Peter

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Authors

Iris Biefang Frisancho Mariscal

Iris Biefang-Frisancho Mariscal

Peter Howells



Abstract

There is a widespread belief that the transparency of UK monetary policy has increased substantially as a result of the introduction of inflation targeting in 1992 and a number of procedural and institutional reforms which accompanied and followed it. Here, money market responses (and other data) are used to test the possibility that improved anticipation of policy moves may be the result of developments other than the institutional reforms popularly cited. We find overwhelming evidence that the switch to inflation targeting itself significantly reduced monetary policy surprises, while subsequent reforms have contributed little. Where we advance substantially on earlier work is to look at the cross-sectional dispersion of agents' anticipation. If the benefit of transparency is the elimination of policy surprise, there is little benefit if the averagely correct anticipations of agents conceal a wide dispersion of view.

Citation

Mariscal, I. B. F., Biefang-Frisancho Mariscal, I., & Howells, P. (2007). Monetary policy transparency in the UK: The impact of independence and inflation targeting. International Review of Applied Economics, 21(5), 603-617. https://doi.org/10.1080/02692170701525966

Journal Article Type Article
Publication Date Dec 1, 2007
Deposit Date Dec 16, 2010
Publicly Available Date Nov 7, 2016
Journal International Review of Applied Economics
Print ISSN 0269-2171
Electronic ISSN 1465-3486
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
Volume 21
Issue 5
Pages 603-617
DOI https://doi.org/10.1080/02692170701525966
Keywords monetary policy, central banks, inflation targeting
Public URL https://uwe-repository.worktribe.com/output/1031914
Publisher URL http://dx.doi.org/10.1080/02692170701525966

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