The Challenge in 2000-2009 to Phillips-Curve-Based Accounts of U.K. Economic Policy

A series of research papers that appeared from 2000 to 2009 made the case that the U.K. authorities in the 1950s, 1960s, and 1970s eschewed Phillips-curve-based analysis and that, consequently, the U.K. Great Inflation of the 1970s should not be regarded as resulting from policymakers’ pursuit of a perceived long-run inflation/unemployment tradeoff. The position advanced in these 2000-2009 papers was that, instead, U.K. economic policy until 1979 subscribed to a nonmonetary perspective on inflation. This perspective implied U.K. authorities’ rejection of Phillips-curve-type tradeoff analysis, but it also meant that they misjudged the importance of monetary policy in inflation control, thereby compounding the country’s inflation problem. When this series of papers began to appear at the start of the 2000s, the tradeoff-centered interpretation of the U.S. Great Inflation was highly prevalent and was also being applied to the U.K. Great Inflation. By late in the decade, however, the case—as outlined in the 2000-2009 papers—against Phillips-curve-based accounts of historical policy conduct had gained notable acceptance among central bankers and academic researchers who discussed the U.K. Great Inflation. This paper corrects erroneous statements that the challenge to Phillips-curve-based accounts of historical U.K. policymaker behavior only appeared in research starting in the 2010s