This paper quantifies for the United Kingdom the general equilibrium costs of individuals holding cash to economise on 'shopping time'. These are a subset of a wider range of costs caused by inflation. The paper tests whether or not money balances tend to a finite number as nominal interest...

This paper explores the theoretical implication of parameter uncertainty for the optimal monetary policy reaction function. The policy-maker sets the nominal interest rate to meet an inflation target in a simple dynamic model of the economy. The paper looks at how parameter uncertainty in the...

This paper examines the empirical importance of parameter uncertainty for monetary policy-making in the United Kingdom, using a method pioneered by Brian Sack of the US Federal Reserve. Using a VAR model of the UK economy and an assumed quadratic loss function for the policy-maker, an optimal...