Contact Us
Sign In / Sign Up for FREE
Go to advanced search...
Nobody downloaded yet

How Inflation Targeting Operates in the UK - Coursework Example

Comments (0) Cite this document
"How Inflation Targeting Operates in the UK" paper discuses inflation targeting, as a monetary policy mechanism that has been adopted and extensively applied in several countries in the past two decades. The discussion is centered on the application of inflation targeting in UK…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.8% of users find it useful
How Inflation Targeting Operates in the UK
Read TextPreview

Extract of sample "How Inflation Targeting Operates in the UK"

Download file to see previous pages Managing inflation has become a major function of several players in the economy and government. Inflation targeting offers a new formula for inflation management and overall formulation and application of monetary policy.

The traditional mechanism involved the public declaration of inflation figures for the subsequent year. However, this has proved to be inefficient as it fails to provide the way forward towards maintaining a stable inflation rate for economic viability. Inflation targeting has been applied in the UK since 1992 with several modifications and advancements made over the years with exceptional reference to 1997. Comparative statistics indicate that there has been great improvement as regards stability of inflation rate as well as the development and application of viable monetary policy mechanism tact since the launching of inflation targeting in UK two decades ago. This is an indicator of the numerous benefits of inflation targeting as an effective mechanism of managing inflation and monetary policy. This paper will specifically focus on the practice of inflation targeting in UK as well as its relevant benefits (Benati n.d, 4).

Historically, the monetary strategy of UK has been in a condition of continuous upheaval in the period following the Second World War. Nevertheless, from the state of affairs of several nations there are a number of frameworks in addition to monetary strategy that brought about a certain level of macroeconomic stability in UK which could not have been considered in 1992 (Bean 2003, 26). There are two important ingredients namely inflation target and operational independence, the most significant is the inflation target. There has also been the aspect of reinforcing stable and low inflation along with affixing inflation expectations. A number of challenges will emanate and threat monetary strategy makers in UK as well as other parts of the world. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(How Inflation Targeting Operates in the UK Coursework, n.d.)
How Inflation Targeting Operates in the UK Coursework.
(How Inflation Targeting Operates in the UK Coursework)
How Inflation Targeting Operates in the UK Coursework.
“How Inflation Targeting Operates in the UK Coursework”.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF How Inflation Targeting Operates in the UK

How Panasonic's Targeting Corporate America

... people who use them and who wish to produce them (Panasonic Annual Report, 2011; Panasonic Website, 2011). 5) Panasonic is very clear and focused in terms of its aims and objectives and it knows how it is to reach them in the shortest possible time. As mentioned earlier also, Panasonic is mainly focused on its research and development. Activities that are part of its operations during the research and development are mainly divided into three parts. First of all Panasonic wants to work on its Display quality on screen, television, camera or any other equipment. Second, it aims to become even better at advanced new applications that improve everyday living such as home appliances for instance. Thirdly, it works on the quality of voice...
8 Pages(2000 words)Case Study

Explain how inflation targeting operates in the UK and Critically evaluate the benefits of inflation targeting

...?How inflation targeting operates in the UK and critically evaluates the benefits of inflation targeting College How inflation targeting in the UK operates Inflation targeting is a move by the central bank to set a specific inflation target which will then be achieved by either raising interest rates or lowering it. Interest rate is inversely related to inflation. So when the current inflation is high above the target, the central bank will respond by raising the interest rate in order to put a downward pressure on inflation and when the current inflation is way below the target the central bank will lower interest rate in order to put an upward pressure on the inflation (Carol 2002). Inflation is all about price stability and it has been...
8 Pages(2000 words)Essay

Inflation targeting

... bank preferences, a relatively underexplored issue is how to translate inflation targets into short-term interest rates. This is the issue of how to map explicit "targets" for monetary policy into monetary policy instruments, or how to implement an inflation-targeting framework. An exception is an important contribution by Svensson (1997). Svensson shows that because of lags in the transmission process of short-term interest rates to inflation, inflation targeting implies inflation forecast targeting. In his analysis, the central bank's forecast becomes an explicit intermediate target and its optimal reaction function has the same form as the Taylor rule (1999). Bullard and Schaling (2001) augment the Svensson model with regime switching...
7 Pages(1750 words)Essay

Inflation Targeting

... “On Money and Banking” Simply put, inflation targeting is a monetary policy framework that deals primarily with price stability as its primary goal. This is accomplished through the establishment of a specific inflation rate that a country’s central bank would strive to meet over a set period of time. By carefully orchestrating interest rates and other financial instruments in accordance with the intricacies of the market, these targets inflation rates are rendered more feasible and realistic. Perhaps the biggest advantage of utilizing inflation targeting lies in its ability to be easily understood by the public. It focuses on the long term, and theoretically leads to greater transparency as its easily quantifiable...
2 Pages(500 words)Essay

"Taylor Rule and Inflation Targeting"

...Taylor Rule and Inflation Targeting al Affiliation) Taylor Rule and Inflation Targeting The Taylor rule asserts that the Federal Reserve relies on the estimated economy’s unutilized resources and inflation behavior to allocate funds rate (Hetzel, 2000). Taylor rule offers recommendations on how the Federal Reserve can address short-term economic changes and long-term inflation by setting short-term interest rates. Apparently, this rule is not an effective guide of economic policy. This emanates from the fact that the rule seeks to recommend how the Federal Reserve should control inflation instead of preventing it from occurring (Hetzel, 2000). Indeed, the rule reckons how the Federal Reserve System has raised the funds rate in responding...
1 Pages(250 words)Coursework

Central Bank Independence and Inflation Targeting

The main cause for this lay in the fact that the general rise in the variability as well as the general level of inflation, which largely depended on the increase in the oil prices, led to large concerns regarding the efficacy of the Central banks in fulfilling its commitment of controlling such inflationary tendencies (Posen, 1998). There was significant consensus on the opinion that central banks most of the larger economies had faced some incentives which had the capability of inherently leading to an ‘inflationary bias,’ and this bias had resulted in the high inflationary tendencies prevalent during the 1970s (Alesina & Summers, 1993). In essence, the changes in the inflationary tendencies to higher levels need...
40 Pages(10000 words)Essay

Inflation Targeting

Inflation targeting is an economic policy in which a central bank estimates and sets public a project inflation rate and then try to push the actual inflation towards the target by using interest rate changes and other monetary tools. As the interest rate and inflation rate are inversely related the likely moves of the central bank to raise or lower interest rates become more transparent under the policy of inflation targeting. The scenarios are; when inflation rates are above the target, the bank raises interest rates, this usually (but not always) affects overtime on cooling the economy and bringing down inflation. And the opposite, when inflation appears below the target, the bank lowers interest rates, this usually (again, not...
8 Pages(2000 words)Coursework

Economic Policies of Great Britain: Inflation Targeting

.... Inflation target in UK has led to reduction in inflation rates and this is a good policy to be enumerated by other countries. References Bank of England. 2000-10. “An Independent Bank of England”. 12 Mar 2010.> Bernanke, B., Laubach, T., Mushkin and Posen. 1999. Inflation Targeting: Lessons from the International Experience. New Jersey: Princeton university press. Blejer, Alain, Leone, Werlang. 2000. Inflation Targeting in Practice: Strategic and Operational Issues and Application to Emerging Market Economies. Washington DC: IMF. British Chamber of Commerce. 2006. “UK Economy.” UK Trade and Investments. 18 Mar 2010. <
8 Pages(2000 words)Research Paper

Inflation Targeting and Price Leveling

... would not be much affected as the case of emerging economies (Debelle 239). According to Debelle, such policies, despite being difficult to formulate and implement, they are necessary for a country to achieve meaningful economic development (Debelle 242). Often, anticipated high inflation does not favor business operations, thus entrepreneurs would shy from investing in regions, which are volatile to inflation (Debelle 246). Consequently, this interferes with the country’s development since it is through such important investments that the country might gain economic advancement. From a theoretical perspective, inflation targeting involves the formulation of a solid fiscal structure that helps a given country, to accomplish...
33 Pages(8250 words)Research Paper

Financial Services: Inflation Targeting

...targeting. How inflation targeting operates in the UKInflation targeting comprises of certain chief elements. These include the public declaration of medium-term inflation targets; institutional obligation to price stability as the fundamental objective of monetary policy; use of all encompassing information for creating policy tools; enhanced transparency of strategies related to monetary policy in context of communication of plans, goals as well as resolutions of monetary authorities; and, elevated liability of the central banks for accomplishing its...
6 Pages(1500 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Coursework on topic How Inflation Targeting Operates in the UK for FREE!

Contact Us