The United Kingdom is a highly open economy, and has a monetary policy strategy of targeting inflation in consumer prices. In this paper, we look at the evidence from the UK on inflation behaviour, and examine the propositions from several theoretical models about inflation dynamics in an open...

The ‘new open-economy macroeconomics’ seeks to provide an improved basis for monetary and exchange-rate policy through the construction of open-economy models that feature rational expectations, optimising agents, and slowly adjusting prices of goods. This paper promotes an alternative...

This paper updates and extends Friedman’s (1972) evidence on the lag between monetary policy actions and the response of inflation. Our evidence is based on UK and US data for the period 1953–2001 on money growth rates, inflation, and interest rates, as well as annual data on money growth...