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Changes in the relationship between short‐term interest rate, inflation and growth: evidence from the UK, 1820–2014
journal contribution
posted on 2019-07-01, 13:36 authored by Erdenebat Bataa, Andrew VivianAndrew Vivian, Mark WoharThis paper examines the dynamic relationship between interest rates, inflation and economic growth using a long dataset for the UK. The approach adopted enables us to identify structural breaks in the dynamic system (vector autoregression (VAR)). We find interest rates respond much more strongly to growth and inflation over recent decades, and forecast error variance decomposition analysis indicates there is increasing interconnectedness between the variables in recent years. Economic policymakers need to carefully monitor the linkages between these variables and be prepared to adjust their monetary policy tools when faced with structural changes.
History
School
- Business and Economics
Department
- Business
Published in
Bulletin of Economic ResearchVolume
71Issue
4Pages
Pages 616-640Citation
BATAA, E., VIVIAN, A.J. and WOHAR, M.E., 2019. Changes in the relationship between short‐term interest rate, inflation and growth: evidence from the UK, 1820–2014. Bulletin of Economic Research, 71(4), pp. Pages 616-640.Publisher
© Board of Trustees of the Bulletin of Economic Research and John Wiley & SonVersion
- AM (Accepted Manuscript)
Publisher statement
This is the peer reviewed version of the following article: BATAA, E., VIVIAN, A.J. and WOHAR, M.E., 2019. Changes in the relationship between short‐term interest rate, inflation and growth: evidence from the UK, 1820–2014. Bulletin of Economic Research, 71(4), pp. Pages 616-640, which has been published in final form at https://doi.org/10.1111/boer.12199. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived VersionsAcceptance date
2019-03-21Publication date
2019-05-10ISSN
0307-3378eISSN
1467-8586Publisher version
Language
- en