Year: 2003
Type: book
Abstract: Inflation is fundamental to UK macroeconomic policy given that it is the sole target of monetary\npolicy. However, there is no clear consensus on its determination, with a plethora of competing theories.\nHendry (2001) argues that there is no single cause of inflation. This paper analyses quarterly UK inflation\nfrom 1966-2002 based on this premise. The use of a general to specific framework in which all extant\ntheories of inflation are captured in the general unrestricted model ensures that there are no a priori\nrestrictions on the possible determinants of inflation. Excess demand pressures play a fundamental role in\nthe determination of inflation but they are notoriously difficult to measure and hence a detailed derivation\nof the output gap is undertaken as a central explanatory variable. We derive a dominant congruent model\nof inflation within a single equation dynamic framework that encompasses all relevant theories and is a\ngood representation of the data.
Author: Jennifer L. Castle
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2914516689