Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-23T00:31:15.218Z Has data issue: false hasContentIssue false

9 - Finding New Objectives, Seeking New Instruments

from III - Targets and Instruments

Published online by Cambridge University Press:  14 November 2024

By
David Cobham
Edited by
Sean Holly ,
Michael McMahon ,
Stephen Millard  and
Anna Watson
Sean Holly
Affiliation:
University of Cambridge
Michael McMahon
Affiliation:
University of Oxford
Stephen Millard
Affiliation:
National Institute of Economic and Social Research
Anna Watson
Affiliation:
University of Cambridge
Get access

Summary

The adoption of inflation targets in the U.K, with the Monetary Policy Committee given instrument independence in 1997, is often presented as the answer to the assignment problem: the MPC was made responsible for the single objective of price stability, to be attained via its deployment of its single instrument, the policy rate. This chapter uses this perspective to examine the evolution of the workings of monetary policy and the MPC over its first twenty-five years, how the Bank and the MPC, came across additional possible objectives and searched for additional possible instruments. implying the need for some recasting of the role of the MPC and the way in which it operates.

Keywords

Price stabilityassignment principleinstrument independence
Type
Chapter
Information
Reflections on Monetary Policy after 25 Years of the MPC , pp. 107 - 118
Publisher: Cambridge University Press
Print publication year: 2024

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Allsopp, Chris (2002), ‘Macroeconomic policy rules in theory and in practice’, www.bankofengland.co.uk/speech/2002/macroeconomic-policy-rules-in-theory-and-in-practice (accessed 22 June 2022).Google Scholar
Allsopp, Chris (2010), ‘Inflation targeting and asset prices’, in Cobham, David, Eitrheim, Oyvind, Gerlach, Stefan and Qvigstad, Jan (eds.), Twenty Years of Inflation Targeting: Lessons Learned and Future Prospects, Cambridge University Press, 172–91.Google Scholar
Bailey, Andrew, Bridges, Jonathan, Harrison, Richard, Jones, Josh and Mankodi, Arkash (2020), ‘The central bank balance sheet as a policy tool: Past, present and future’, Bank of England Staff Working Paper no. 899.Google Scholar
Ball, Laurence (2010), ‘The performance of alternative monetary regimes’, in Friedman, Ben and Woodford, Michael (eds.), Handbook of Monetary Economics, Volume 3B, 303–43. North Holland.Google Scholar
Bean, Charles (2003), ‘Asset prices, financial imbalances and monetary policy: Are inflation targets enough?’ Bank for International Settlements Working Paper no. 140.Google Scholar
Bean, Charles, Paustian, Matthias, Penalver, Adrian and Taylor, Tim (2010), ‘Monetary policy after the fall’, Proceedings – Economic Policy Symposium – Jackson Hole, Federal Reserve Bank of Kansas City, 267–328.Google Scholar
Bernanke, Ben (2010), ‘Monetary policy and the housing bubble’, www.federalreserve.gov/newsevents/speech/bernanke20100103a.htm (accessed 22 June 2022).Google Scholar
Bernanke, Ben and Gertler, Mark (1999), ‘Monetary policy and asset price volatility’, in ‘New challenges for monetary policy’, Proceedings – Economic Policy Symposium – Jackson Hole, Federal Reserve Bank of Kansas City, 77–128.Google Scholar
Bernanke, Ben and Gertler, Mark (2001), ‘Should central banks respond to movements in asset prices?’ American Economic Review. 91(2), 253–57.CrossRefGoogle Scholar
Cecchetti, Stephen, Genberg, Hans and Wadhwani, Sushil (2002), ‘Asset prices in a flexible inflation targeting framework’, NBER Working Paper no. 8,970.Google Scholar
Cecchetti, Stephen Genberg, Hans, Lipsky, John and Wadhwani, Sushil (2000), Asset Prices and Central Bank Policy: Geneva Report on the World Economy no. 2. Centre for Economic Policy Research.Google Scholar
Chadha, Jagjit, Macmillan, Peter and Nolan, Charles (2007), ‘Independence day for the “Old Lady”: A natural experiment on the implications of central bank independence’, Manchester School. 75(3), 311–27.CrossRefGoogle Scholar
Chancellor of the Exchequer (2013), ‘Remit for the Monetary Policy Committee’, www.bankofengland.co.uk/letter/2013/mpc-remit-march-2013, (accessed 22 June 2022).Google Scholar
Chudik, Alexander, Kammiar, Mohaddes, Hashem, Pesaran and Mehda, Raissi (2017), ‘Is there a debt-threshold effect on output growth?’ Review of Economics and Statistics. 99(1), 135–50.CrossRefGoogle Scholar
Cobham, David (2006), ‘The overvaluation of sterling since 1996: How the policymakers responded and why’, Economic Journal. 116 (June), F185–F207.CrossRefGoogle Scholar
Cobham, David (2012), ‘The past, present and future of central banking’, Oxford Review of Economic Policy. 28(4), 729–49.CrossRefGoogle Scholar
Cobham, David (2013a), ‘Central banks and house prices in the run-up to the crisis’, Oxford Economic Papers. 65(S1), i42–i65.CrossRefGoogle Scholar
Cobham, David (2013b), ‘Monetary policy under the Labour government 1997–2010: The first 13 years of the MPC’, Oxford Review of Economic Policy. 29(1), 47–70.CrossRefGoogle Scholar
Cobham, David (2013c), ‘Forward guidance in the UK: Holding rates down till something happens’, in den Haan, W. (ed.), Forward Guidance, VoxEU ebook.Google Scholar
Cobham, David and Song, Mengdi (2021), ‘Transitions between monetary policy frameworks and their effects on economic performance’, Economic Modelling, 95, 311–29.CrossRefGoogle Scholar
Cobham, David, Macmillan, Peter, Mason, Connor and Song, Mengdi (2022), ‘Economic performance under different monetary policy frameworks’, Journal of Policy Modeling. 44(2), 431–49.CrossRefGoogle Scholar
Dokko, Jane, Doyle, Brian, Kiley, Michael, Kim, Jinil, Sherland, Shane, Sim, Jae and van der Heuvel, Skander. (2009), ‘Monetary policy and the housing bubble’, Finance and Economics Discussion Paper no. 2009–49, Federal Reserve Board of Governors, Washington, DC.CrossRefGoogle Scholar
Fforde, John (1983), ‘Setting monetary objectives’, Bank of England Quarterly Bulletin. 23(2), 200–8.Google Scholar
Friedman, Ben (2015), ‘Has the financial crisis permanently changed the practice of monetary policy? Has it changed the theory of monetary policy?’ Manchester School. 83(S1), 5–19.CrossRefGoogle Scholar
Goodhart, Charles (2015), ‘Why has monetary policy been comparatively ineffective?’ Manchester School. 83(S1), 20–9.CrossRefGoogle Scholar
Goodhart, Charles, Baker, Melanie, Ashworth, Jonathan and O’Brien, Anthony (2013). ‘Monetary targetry: Possible changes under Carney’, Morgan Stanley Research Europe.Google Scholar
Jordà, Oscar and Taylor, Alan (2013), ‘The time for austerity: Estimating the average treatment effect of fiscal policy’, Economic Journal. 126, 219–55.Google Scholar
Nickell, Stephen (2002), ‘House prices, household debt and monetary policy’, www.bankofengland.co.uk/speech/2002/house-prices-household-debt-and-monetary-policy (accessed 22 June 2022).Google Scholar
Nickell, Stephen (2005), ‘Practical issues in UK monetary policy, 2000–2005’, www.bankofengland.co.uk/speech/2005/practical-issues-in-uk-monetary-policy-2000-2005 (accessed 22 June 2022).Google Scholar
Orphanides, Athanasios (2010), ‘Reflections on inflation targeting’, in Cobham, David, Eitrheim, Oyvind, Gerlach, Stefan and Qvigstad, Jan (eds), Twenty Years of Inflation Targeting: Lessons Learned and Future Prospects, Cambridge University Press, 13–24.Google Scholar
Posen, Adam (2019), ‘The eroded foundations of inflation targeting’, Manchester School. 87, (S1), 45–61.CrossRefGoogle Scholar
Schwartz, Anna (1995), ‘Why financial stability depends on price stability’, Economic Affairs. 15(4), 21–5.CrossRefGoogle Scholar
Stockton, David (2012), ‘Review of the Monetary Policy Committee’s forecasting capability’, www.bankofengland.co.uk/-/media/boe/files/news/2012/november/the-mpcs-forecasting-capability.pdf (accessed 22 June 2022).Google Scholar
Wren-Lewis, Simon (2003), Estimates of Equilibrium Exchange Rates for Sterling against the Euro. HM Treasury.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×