Base money rules in the United Kingdom

Article Abstract:

A specific class of monetary policy feedback rules seem to be appropriate for a number theoretical and practical macro-models in UK. The feedback rules, known as McCallum's rule, are simulated to analyze the performance of a probable monetary policy in UK. The result shows that such a rule is able to arrest the average inflation rate below 2% with a little variation due to instrument or real output variability. The rules can serve some supplementary roles in the monetary policy formulation even under a inflation target strategy and minimize mistakes in policy decisions.

Monetary policy

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Inflation: too much money or too much credit?

Article Abstract:

Inflation can be affected both by monetary changes and by credit shocks, as is shown by a vector autoregression analysis of United Kingdom inflation in the 1980s. Credit growth reached 22% in 1988, and inflation increased to 6% in 1988 from 3% in 1986. Credit shocks are related to the variance of inflation, while narrow money growth affectd the mean. The government should have focused on monetary targets rather than the exchange rate in the late 1980s, and this would have avoided the subsequent recession.

Economic aspects, Inflation (Finance), Money supply, Inflation (Economics)

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