Book contents
- The Changing Fortunes of Central Banking
- The Changing Fortunes of Central Banking
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Acknowledgement
- 1 Introduction and Overview
- Part I Monetary Economics and Policy
- 2 Money
- 3 Monetary Control in the UK
- 4 Pristine and Parsimonious Policy
- 5 Central Bank Talk about Future Monetary Policy
- 6 Bank Capital and Monetary Policy Transmission
- 7 When Are Central Banks More Likely to Target Asset Prices?
- Part II Financial Stability and Regulatory Policy
- Part III Foreign Exchanges and International Architecture
- Part IV The Millennium Challenges of Central Banks
- Index
- References
3 - Monetary Control in the UK
The Impossible Dream?
from Part I - Monetary Economics and Policy
Published online by Cambridge University Press: 29 March 2018
Book contents
- The Changing Fortunes of Central Banking
- The Changing Fortunes of Central Banking
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Acknowledgement
- 1 Introduction and Overview
- Part I Monetary Economics and Policy
- 2 Money
- 3 Monetary Control in the UK
- 4 Pristine and Parsimonious Policy
- 5 Central Bank Talk about Future Monetary Policy
- 6 Bank Capital and Monetary Policy Transmission
- 7 When Are Central Banks More Likely to Target Asset Prices?
- Part II Financial Stability and Regulatory Policy
- Part III Foreign Exchanges and International Architecture
- Part IV The Millennium Challenges of Central Banks
- Index
- References
Summary
Economic openness matters for work on monetary economics. This chapter sets out the basic theory, and discusses problems in the interpretation of so-called “causality tests” of the relationship between money and income. This leads to the difficulties of monetary control under different exchange rate regimes. The chapter considers various UK approaches to monetary control, and in particular the approach known as “Competition and Credit Control”. After the attempts to control the money supply domestically seemed to have foundered, resort was once again made to an external constraint. Sterling became linked to the DM. In turn this ended through the pressure of events. The Bundesbank needed to tighten policy to restrain German inflation after reunification. British inflation did however need no such restraining, so after a brief period of turbulence sterling was floated, and the UK adopted an inflation targeting regime. Responsibility for achieving the inflation target rested with the Bank, but there was no mention of money in the new framework. This vanishing of money was not unique to Britain. But there are signs of a return. Money has started to feature again in monetary policy discussions. Perhaps its control may once again be an explicit objective of policy.
- Type
- Chapter
- Information
- The Changing Fortunes of Central Banking , pp. 32 - 47Publisher: Cambridge University PressPrint publication year: 2018
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