Financial crises and monetary policy: evidence from the UK

Christopher Martin, Costas Milas

Research output: Contribution to journalArticle

24 Citations (Scopus)
252 Downloads (Pure)

Abstract

We analyse UK monetary policy using monthly data for 1992-2010. We have two main findings. First, the Taylor rule breaks down after 2007 as the estimated response to inflation falls markedly and becomes insignificant. Second, policy is best described as a weighted average of a "financial crisis" regime in which policy rates respond strongly to financial stress and a "no-crisis" Taylor rule regime. Our analysis provides a clear explanation for the deep cuts in policy rates beginning in late 2008 and highlights the dilemma faced by policymakers in 2010-11.
Original languageEnglish
Pages (from-to)654-661
JournalJournal of Financial Stability
Volume9
Issue number4
Early online date5 Sep 2012
DOIs
Publication statusPublished - Dec 2013

Fingerprint Dive into the research topics of 'Financial crises and monetary policy: evidence from the UK'. Together they form a unique fingerprint.

  • Cite this