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Turning in the widening gyre: monetary and fiscal policy in interwar Britain

David Ronicle ()
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David Ronicle: Bank of England and International Monetary Fund

No 968, Bank of England working papers from Bank of England

Abstract: This paper brings together modern empirical techniques, a sign-restricted structural vector autoregression, with contemporary high frequency data to answer an old question – what role did macroeconomic policy play in Britain’s high unemployment and deflation in the years 1919 to 1938. Its specific innovation is to draw on a previously little-used weekly publication of public finance statistics, allowing the roles of taxation, public spending and monetary policy to be assessed side-by-side in a coherent framework. In a period of particularly unsettled policy the paper finds that policy shocks, both monetary and fiscal, made a material contribution to variation in prices and unemployment – and these played a central role in the two great recessions of the period, modern Britain’s most severe. Other policy choices could have delivered better outcomes for prices and unemployment – but these would have required making different choices in the face of conflicting objectives and some sharp trade-offs.

Keywords: Monetary policy; fiscal Policy; economic history; Great Depression (search for similar items in EconPapers)
JEL-codes: E52 E62 N14 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2022-04-13
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his, nep-hpe, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0968

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