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Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/900

Title: Has monetary policy reacted to asset price movements? Evidence from the UK
Authors: Kontonikas, A
Montagnoli, A
Keywords: Monetary Policy, Asset Prices
Publication Date: 2002
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 02-11
Abstract: This paper examines the relationship between monetary policy and asset prices in the context of empirical policy rules. We begin our analysis by establishing the forecasting ability of house and stock price changes with respect to future aggregate demand. We then report estimates of monetary policy reaction functions for the United Kingdom over the period 1992-2003. We find that UK policymakers appear to take into account the effect of asset price inflation when setting interest rates with a higher weight being assigned to property market fluctuations. Asset inflationaugmented rules describe more accurately actual policy, and the results are robust to modelling the effect of the Bank of England independence.
URI: http://bura.brunel.ac.uk/handle/2438/900
Appears in Collections:School of Social Sciences Research Papers

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