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Potential information and target variables for UK monetary policy

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  • Hakan Berument
  • Richard Froyen

Abstract

The relationship between traditional monetary policy goal variables (nominal GDP, real GPD and the inflation rate) and a number of financial market variables is investigated. The question examined is which if any of these financial market variables (monetary aggregates, interest rates and interest rate spreads) are potentially useful as either information variables or intermediate targets. While the implications concerning the usefulness of the financial variables considered are pessimistic concerning nominal GDP, more robust relationships are found for real GDP and inflation. The latter finding is of interest given the current UK monetary policy strategy of inflation targeting. Our results are, however, more supportive of the usefulness of several financial variables as information variables than as intermediate targets.

Suggested Citation

  • Hakan Berument & Richard Froyen, 1998. "Potential information and target variables for UK monetary policy," Applied Economics, Taylor & Francis Journals, vol. 30(4), pages 449-463.
    • Handle: RePEc:taf:applec:v:30:y:1998:i:4:p:449-463
    DOI: 10.1080/000368498325723
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    1. Andrew C. Harvey, 1990. "The Econometric Analysis of Time Series, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026208189x, April.
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    1. Aaron Jackson & William Miles, 2009. "Quantitative goals for monetary policy: a quantile regression approach," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2065-2071.
    2. Hakan Berument & Zubeyir Kilinc & Umit Ozlale, 2005. "The Missing Link Between Inflation Uncertainty And Interest Rates," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(2), pages 222-241, May.

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