Was UK inflation more stable and/or less uncertain before 1914 or after 1945? We address these questions by estimating a statistical model with changing volatilities in transient and persistent components of inflation. Three conclusions emerge. First, since periods of high and low volatility...

We compare market prices of risk in economies with identical patterns of endowments, priors, and information flows, but two different market structures, one with complete markets, another in which consumers can trade only a single risk-free bond. We study how opportunities to speculate, uncommon...

This paper undertakes a Bayesian analysis of optimal monetary policy for the U.K. We estimate a suite of monetary-policy models that include both forward- and backward-looking representations as well as large- and small-scale models. We find an optimal simple Taylor-type rule that accounts for...