The British Opt-Out from the European Monetary Union: Empirical Evidence from Monetary Policy Rules

38 Pages Posted: 26 Mar 2012

See all articles by Stefano d'Addona

Stefano d'Addona

University of Roma Tre

Ilaria Musumeci

University of Rome III

Multiple version iconThere are 2 versions of this paper

Date Written: March 26, 2012

Abstract

We analyze the current state of monetary integration in Europe, focusing on the United Kingdom’s position regarding the European Monetary Union (EMU). The interest rate decisions of the European Central Bank and the Bank of England are compared through different specifications of the Taylor rule. Comparison of the monetary conduct of these two institutions provides useful guidance in identifying the differences that the British Government claims motivating its refusal to join the EMU. Testing for forward-looking behavior and possible asymmetries in policy responses, we show evidence supporting the opt-out decision taken by the British Government.

Keywords: Taylor rule, European monetary integration, Regime switching models, Interest rate smoothing

JEL Classification: E32, E52, E38

Suggested Citation

d'Addona, Stefano and Musumeci, Ilaria, The British Opt-Out from the European Monetary Union: Empirical Evidence from Monetary Policy Rules (March 26, 2012). CEIS Working Paper No. 225, Available at SSRN: https://ssrn.com/abstract=2028972 or http://dx.doi.org/10.2139/ssrn.2028972

Stefano D'Addona (Contact Author)

University of Roma Tre ( email )

Via Chiabrera, 199
Rome, 00145
Italy

Ilaria Musumeci

University of Rome III ( email )

Via Ostiense, 159
Rome, RM 00154
Italy

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