Browsing by Subject "Inflation anchors"

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    A century and three-quarters of bank rate and long-term interest rates in the United Kingdom
    (Wiley-Blackwell Publishing Ltd., 2017) Berument, Hakan; Cabezon, E.; Froyen, R.
    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
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    The Fisher effect on long-term U.K. interest rates in alternative monetary regimes: 1844-2018
    (Routledge, 2021-02-28) Berument, Hakan; Froyen, R. T.
    The Fisher Effect is one of the most widely studied relationships in monetary economics. Previous studies have found little evidence of a Fisher effect in pre-World War I data for the United Kingdom. An explanation for this is the near white noise property of the inflation rate under the Classical Gold Standard. There is more evidence of a Fisher effect in the post-World War II years when the inflation rate showed more persistence. This paper studies the evidence on the Fisher effect over the time period 1844-2018. This period covers several distinct monetary regimes. The monetary regime is an important factor determining the time series behavior of the inflation rate which, in turn, has been shown to be crucial to the strength of the Fisher effect. Distinctive features of the study are the focus on the long-term interest rate and coverage of the current inflation targeting regime in the United Kingdom.