British inflation and unemployment in the 1970s: A model-based decomposition

Kent Matthews, Patrick Minford

Research output: Journal PublicationArticlepeer-review

1 Citation (Scopus)


The UKs stagflation in the 1970s is decomposed into its causative factors, using the Liverpool rational expectations model. It is found that there was a large rise in the natural rate of unemployment, mainly due to rising union density; that fiscal and monetary shocks had little effect on the resulting rise in unemployment; and the high inflation of the period was due to persistent and large fiscal deficits, with their accompanying monetization. Mrs Thatcher inherited an inflation induced by an ongoing deficit and a natural rate of over 2 million unemployed.

Original languageEnglish
Pages (from-to)103-115
Number of pages13
JournalApplied Economics
Issue number1
Publication statusPublished - Jan 1996
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics


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