Taylor Rules for the UK Economy Under Different Monetary Regimes: Application of Advanced Modelling Techniques in a Monetary Policy Framework

This document analyses whether the policy maker behaves differently under various monetary policy regimes which is reflected by a change in the coefficient of the Taylor rule. The estimated value of the coefficients, given the chosen monetary targets, will also help us characterise whether the Bank of England was more or less active according to the Taylor rule framework. In addition, attempt will be made to explain whether the empirical results are expected or not, according to the observed monetary regime. Moreover, this analysis compares the results of the different estimation techniques used to identify the sensitivity of the central bank on inflation and output gap and lastly we discuss the relative appropriateness of each technique given their underlying assumptions.