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Is Sterling M3 the Right Aggregate?

In: Monetarism in the United Kingdom


  • Robin Bade
  • Michael Parkin


Since the election of Mrs Thatcher in 1979 world attention has been focused on United Kingdom economic policy in general and monetary policy in particular. This paper attempts to evaluate the monetary strategy which has evolved through the 1970s and which is now being pursued with vigour by the Thathcer government. The objective of policy is to slow down inflation with minimum effects on unemployment and deviations of real output from trend. This objective is being pursued by aiming for a target growth rate of a monetary aggregate, sterling M3, which is announced in advance and which follows a declining path for some years into the future.1 The specific questions addressed are, first: is there any evidence from United Kingdom experience that any monetary aggregate influences the behaviour of prices and in such a way as to make it conceivable that inflation could be brought under control while doing little damage to the rate of unemployment and level of real output? Second, is the particular monetary aggregate chosen by the authorities (sterling M3) the correct one?

Suggested Citation

  • Robin Bade & Michael Parkin, 1984. "Is Sterling M3 the Right Aggregate?," Palgrave Macmillan Books, in: Brian Griffiths & Geoffrey E. Wood (ed.), Monetarism in the United Kingdom, pages 241-286, Palgrave Macmillan.
  • Handle: RePEc:pal:palchp:978-1-349-06284-3_18
    DOI: 10.1007/978-1-349-06284-3_18

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