The cost of political intervention in monetary policy
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Data from a unique monetary ‘experiment’ conducted in the UK during the period 1994-97 are used to investigate the cost of political intervention in monetary policy. The paper finds that the difference between government bond yields in Germany (but not the US) and the UK was systematically related to an index of the credibility of monetary policy constructed on the basis of the frequency of agreements/ disagreements between the Minister of Finance who took the decisions on interest rates and the Bank of England, whose recommendations were published with a lag, with disagreements causing an increase in the yield differential.
School of Economics and Finance discussion paper series ; 0114
Working or discussion paper
Previously in the University eprints HAIRST pilot service at http://eprints.st-andrews.ac.uk/archive/00000055/Revised November 2001
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