Sectoral Shocks and Monetary Policy in the United Kingdom*
| Autor: | Stephen Millard, Huw David Dixon, Jeremy Franklin |
|---|---|
| Rok vydání: | 2023 |
| Předmět: |
Inflation
Macroeconomics Statistics and Probability Economics and Econometrics media_common.quotation_subject Monetary policy jel:E52 jel:E31 Taylor models CPI inflation Sectoral inflation rates Generalised Taylor economy Taylor rule jel:E17 Microdata (HTML) Economics Open economy Statistics Probability and Uncertainty Social Sciences (miscellaneous) media_common |
| Zdroj: | Oxford Bulletin of Economics and Statistics. |
| ISSN: | 1468-0084 0305-9049 |
| Popis: | In this paper, we use an open economy model of the United Kingdom to examine the extent to which monetary policy should respond to movements in sectoral inflation rates. To do this we construct a Generalised Taylor model that takes specific account of the sectoral make up of the consumer price index (CPI), where the sectors are based on the COICOP classification the UK CPI microdata. We calibrate the model for each sector using the UK CPI microdata and model the sectoral shocks that drive sectoral inflation rates as white noise processes, as in the UK data. We find that a policy rule that allows for different responses to inflation in different sectors outperforms a rule which just targets aggregate CPI. However, the gain is small and comes from partially looking through movements in aggregate inflation driven by movements in petrol price inflation, which is volatile and tends not to reflect underlying inflationary pressure. |
| Databáze: | OpenAIRE |
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