Although policymakers and commentators have repeatedly stressed the impact of uncertainty about the true state of the economy on the setting of interest rates, the academic literature has largely ignored this issue. This paper provides a theoretical analysis of how uncertainty about the true...

A simple empirical nonlinear framework is used to analyse monetary policy between 1983 and 2007 in South Africa, focusing on the policy of in?ation targeting introduced in Feb 2000, more precisely when the South African Reserve Bank (SARB) announced that an inflation zone targeting regime of...

This paper studies optimal real-time monetary policy when the central bank takes the exogenous volatility of the output gap and inflation as proxy of the undistinguishable uncertainty on the exogenous disturbances and the parameters of its model. The paper shows that when the exogenous...

The present study aims at an econometric investigation oriented toward the estimation of the monetary policy dynamics in Romania, using a model based on the Autoregressive Structural Vector, imposing some restrictions on short term for knowing the response functions of the main macroeconomic...

We argue that although UK monetary policy can be described using a Taylor rule in 1992-2007, this rule fails during the recent financial crisis. We interpret this as reflecting a change in policymakers’ preferences to give priority to stabilising the financial system. Developing a model of...

Macroeconomic practitioners frequently work with multivariate time series models such as VARs, factor augmented VARs as well as time-varying parameter versions of these models (including variants with multivariate stochastic volatility). These models have a large number of parameters and, thus,...

March 2007 saw an increase of 3.1 percent in the Consumer Price Index (CPI) annual inflation rate and triggered the first explanatory letter from the Governor of the Bank of England to the Chancellor of the Exchequer since the Bank of England was granted operational independence in May 1997. The...

The “sub-prime” crisis, which led to major turbulence in global financial markets beginning in mid-2007, has posed major challenges for monetary policymakers. We analyse the impact on monetary policy of the widening differential between policy rates and the 3-month Libor rate, the benchmark...

We show how monetary aggregates can be usefully incorporated in forecasts of inflation. This requires fully disregarding the high-frequency fluctuations blurring the money/inflation relation, i.e., the projection of inflation onto monetary aggregates must be restricted to the low frequencies....

We empirically analyze Taylor-type equations for short-term interest rates in the United Kingdom using quarterly data from 1970Q1 to 2006Q2. Starting from strong evidence against a simple linear Taylor rule, we model nonlinearities using logistic smooth transition regression (LSTR) models. The...