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Inflation, Employment, and Monetary Policy: Objectives and Outcomes in the UK and U.S. Compared

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  • DAVID MILES

Abstract

This paper explores how sensitive is monetary policy to the precise preferences of the central bank over inflation and economic activity. It does so in order to address a puzzle—which is that the U.S. Fed and the Bank of England appear to have quite different objectives and yet have adopted strikingly similar policies in recent years. I use a calibrated model to assess how policy might be sensitive to attaching different weights to inflation, output, and the output gap in central bank objectives. I find that a wide range of weights can give rise to rather similar monetary policies.

Suggested Citation

  • David Miles, 2014. "Inflation, Employment, and Monetary Policy: Objectives and Outcomes in the UK and U.S. Compared," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 155-167, October.
    • Handle: RePEc:wly:jmoncb:v:46:y:2014:i:s2:p:155-167
    DOI: 10.1111/jmcb.12156
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    1. Bean, Charles, 1998. "The New UK Monetary Arrangements: A View from the Literature," Economic Journal, Royal Economic Society, vol. 108(451), pages 1795-1809, November.
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    Cited by:

    1. Lars E.O. Svensson, 2014. "How to Weigh Unemployment Relative to Inflation in Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 183-188, October.
    2. Ruttachai Seelajaroen & Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2020. "Do monetary policy transparency and central bank communication reduce interest rate disagreement?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(3), pages 368-393, April.
    3. Mamatzakis, Emmanuel & Bermpei, Theodora, 2016. "What is the effect of unconventional monetary policy on bank performance?," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 239-263.

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