BoE paper identifies drivers of energy price volatility

Close up of Bank Of England facade with the statue of Duke of Wellington Statue created by Francis Chantrey City of London England

A Bank of England paper, published on Tuesday, shows the volatile energy price movements experienced in the UK during the financial crisis was predominantly caused by domestic risk premiums and productivity shocks.

Stephen Millard, the paper's author, estimates a dynamic stochastic general equilibrium model to capture energy costs and inflation in the UK. Millard says the main complication when observing these indicators is that there are three different consumption goods: non-energy output

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