Studies in Nonlinear Dynamics & Econometrics
Ed. by Mizrach, Bruce
5 Issues per year
IMPACT FACTOR 2016: 0.649
CiteScore 2016: 0.63
SCImago Journal Rank (SJR) 2016: 0.546
Source Normalized Impact per Paper (SNIP) 2016: 0.793
Mathematical Citation Quotient (MCQ) 2016: 0.03
Interest Rate Setting and Inflation Targeting: Evidence of a Nonlinear Taylor Rule for the United Kingdom
We examine potential nonlinear behaviour in the conduct of monetary policy by the Bank of England. We find significant nonlinearity in this policy setting, and in particular that the standard Taylor rule really only begins to bite once expected inflation is significantly above its target. This suggests, for example, that while the stated objective of the Bank of England is to pursue a symmetric inflation target, in practice some degree of asymmetry has crept into interest-rate setting. We argue that, nevertheless, the very predictability of the policy rule, especially when set out in a highly plausible and intuitive nonlinear framework, is perhaps one reason why the United Kingdom has, since the early 1990s, enjoyed price stability combined with relatively strong growth.
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