TY - JOUR
T1 - Financial crises and monetary policy
T2 - evidence from the UK
AU - Martin, Christopher
AU - Milas, Costas
PY - 2013/12
Y1 - 2013/12
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=84867235486&partnerID=8YFLogxK
UR - http://dx.doi.org/10.1016/j.jfs.2012.08.002
U2 - 10.1016/j.jfs.2012.08.002
DO - 10.1016/j.jfs.2012.08.002
M3 - Article
AN - SCOPUS:84867235486
SN - 1572-3089
VL - 9
SP - 654
EP - 661
JO - Journal of Financial Stability
JF - Journal of Financial Stability
IS - 4
ER -