Forecast Targeting and Financial Stability: Evidence from the European Central Bank and Bank of England

Curi, Claudia and Murgia, Lucia Milena (2023) Forecast Targeting and Financial Stability: Evidence from the European Central Bank and Bank of England. Finance Research Letters, 51. ISSN 1544-6123

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Abstract

This paper investigates whether financial markets stability matters in setting monetary policy in the case of the European Central Bank and Bank of England. We show that our Tri-mandate Taylor rule better explains the deviations of the observed policy rate from the implied interest rates for both central banks. The forward-looking version shows that the monetary policy conducted by the ECB is largely affected by the US financial market stability, while only the domestic financial market stability affects the BOE. Lastly, we show that the preferences of monetary policy makers have shifted in the aftermath of the 2008 financial crisis.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Related URLs:
Depositing User: LivePure Connector
Date Deposited: 18 Nov 2022 10:30
Last Modified: 18 Nov 2022 10:30
URI: https://ueaeprints.uea.ac.uk/id/eprint/89926
DOI: 10.1016/j.frl.2022.103486

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