Dating Structural Changes in UK Monetary Policy

Abstract The UK historical monetary policy experience is rich of institutional changes, but it remains unclear which of these many events dominated the policy actions and what timing characterised the inception of different policy regimes. We develop a new empirical approach to answer these questions and we identify in particular the historical institutional events that effectively translated into a shift of the systematic actions of the UK monetary authorities. We find that not all institutional events triggered a contemporaneous change in the actual policy conduct, although a coherent evolution in phases is evident since 1978, when a significant monetary policy rule emerges. These occasional but not sporadic regime changes explain a considerable share of the movements in the official interest rate, as well as an overstatement of the importance of policy inertia.