UK's Rocky Road to Stability

The aim of this book is to fill this gap by carrying out an analysis that helps explain recent U.K. developments, yet focuses on past policies rather than current arrangements. As one study observed, The British experience is one that is full of experiments in monetary regimes and switches in regimes. And that statement was written in 1982, prior to the variety of experiments undertaken in the last two decades: a switch of emphasis of monetary targeting from broad money to the monetary base; a subsequent period of informal and then formal pegging of the pound to the Deutschmark; and inflation targeting from 1992. The authors provide an up-to-date account of U.K. experiences under different policy regimes, with the emphasis on sources of policy mistakes (both in specific policy decisions and, more fundamentally, in the underlying economic analysis). Thus, the objective is not to provide yet another review of inflation targeting in the United Kingdom, but rather, a critical analysis of U.K. monetary policy developments over 1955-2004, focusing on the confusions, misconceptions, and theoretical mistakes in the economic analysis that guided U.K. macroeconomic policy over that period, and how current arrangements have shaken off the earlier sources of error.