Applying the theory to the UK in the early 2020s

Tim Congdon ()

Chapter 8 in Money and Inflation at the Time of Covid, 2025, pp 209-224 from Edward Elgar Publishing

Abstract: Chapter 8 relies on the same analytical framework as Chapter 7, and indeed that developed throughout the book until these two chapters, but applies it to the UK rather than the USA. Announcements by the Bank of England in March 2020 about the size of its asset purchases entailed credit extension by the banks which would cause a sharp acceleration in broad money growth. Further similar announcements in June and November 2020 reinforced the message. As in the USA, the implied money growth rates were far above the trend growth rate of real output, and the disparity between the growth rates of broad money and trend real output could be resolved only by a large increase in inflation. In the UK, as in the USA, asset price inflation – in late 2020 and 2021 – came before the worst of the inflation at the consumer level, which was recorded in 2022 and early 2023.

Keywords: Keynesian Revolution; Great Moderation; Monetary Policy Committee; Bank rate; Disinflationary shock; National wealth (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035328963
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