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      A century and three-quarters of bank rate and long-term interest rates in the United Kingdom

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      Embargo Lift Date: 2019-05-19
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      Author(s)
      Berument, Hakan
      Cabezon, E.
      Froyen, R.
      Date
      2017
      Source Title
      International Finance
      Print ISSN
      1367-0271
      Electronic ISSN
      1468-2362
      Publisher
      Wiley-Blackwell Publishing Ltd.
      Volume
      20
      Issue
      1
      Pages
      26 - 47
      Language
      English
      Type
      Article
      Item Usage Stats
      223
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      232
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      Abstract
      Over the years from 1844 to 2013, the United Kingdom had several distinct monetary policy regimes. This paper examines the relationship between the Bank of England policy rate and UK long-term rates in each regime. Our starting point is R. G. Hawtrey's A century of Bank Rate, which focused mainly on the classical Gold Standard. We also examine the Interwar years, post-Second World War years of policy by discretion and the recent regime of inflation targeting. We find that policy regimes that firmly anchor inflationary expectations result in long-run interest rates becoming less responsive to changes in monetary policy rates. This suggests a conflict between a regime that anchors inflationary expectations and one that allows a central bank to have significant effects on long-term rates via a short-term policy rate. © 2017 John Wiley & Sons Ltd
      Keywords
      Inflation anchors
      Long-term interest rate
      Monetary policy
      Permalink
      http://hdl.handle.net/11693/37088
      Published Version (Please cite this version)
      http://dx.doi.org/10.1111/infi.12101
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      • Department of Economics 724
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