Regulation affects pass-through to current account, BoE paper finds
Liberalisation works in different directions in financial and product markets
The degree of regulation in financial and product markets affects whether monetary policy expansion translates into a rise or fall in the current account, according to a discussion paper published by the Bank of England (BoE) on March 4.
Authors Ida Hjortsoe, Martin Weale and Tomasz Wieladek tackle the problem both theoretically, using a structural model, and empirically, using a vector autoregression model, in the paper Monetary policy and the current account; theory and evidence.
They find
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