The Regional Transmission of UK Monetary Policy

Abstract

Concerns have been raised in the media about a ‘one-size-fits-all’ monetary policy for the UK. Challenging the assumption that a given interest rate change fully reflects how monetary policy is transmitted, we consider the possibility that there may be regional differences in how monetary policy is translated into different financial conditions, and thus economic conditions, in different regions. The analysis suggests that, while UK monetary policy may have greatest impact on central regions in the short run, there is a greater, sustained, impact in the long run on peripheral regions. A comparison of Scottish and UK data provides some evidence.