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DOI

  • Erdenebat Bataa
    National University of Mongolia
  • Andrew Vivian
    Loughborough University
  • Mark Wohar
    University of Nebraska at Omaha
This paper examines the dynamic relationship between interest rates, inflation and economic growth using a long dataset for the UK. The approach adopted enables us to identify structural breaks in the dynamic system (vector autoregression (VAR)). We find interest rates respond much more strongly to growth and inflation over recent decades, and forecast error variance decomposition analysis indicates there is increasing interconnectedness between the variables in recent years. Economic policymakers need to carefully monitor the linkages between these variables and be prepared to adjust their monetary policy tools when faced with structural changes.
Original languageEnglish
Pages (from-to)616-640
JournalBulletin of Economic Research
Volume71
Issue number4
DOIs
Publication statusPublished - Oct 2019
Externally publishedYes
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