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Measuring inflation expectations in interwar Britain

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  • Lennard, Jason
  • Meinecke, Finn
  • Solomou, Solomos

Abstract

What caused the recovery from the British Great Depression? A leading explanation – the ‘expectations channel’– suggests that a shift in expected inflation lowered realinterest rates and stimulated consumption and invest-ment. However, few studies have measured, or tested theeconomic consequences of, inflation expectations. In thispaper,wecollecthigh-frequencyinformationfromprimaryand secondary sources to measure expected inflation inthe United Kingdom between the wars. A high-frequencyvector autoregression suggests that inflation expectationswere an important source of the early stages of economicrecovery in interwar Britain.

Suggested Citation

  • Lennard, Jason & Meinecke, Finn & Solomou, Solomos, 2022. "Measuring inflation expectations in interwar Britain," LSE Research Online Documents on Economics 116889, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:116889
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    File URL: http://eprints.lse.ac.uk/116889/
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    References listed on IDEAS

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    Cited by:

    1. Martin Ellison & Sang Seok Lee & Kevin Hjortshøj O'Rourke, 2024. "The Ends of 27 Big Depressions," American Economic Review, American Economic Association, vol. 114(1), pages 134-168, January.
    2. Jason Lennard, 2023. "Sticky wages and the Great Depression: evidence from the United Kingdom," European Review of Economic History, European Historical Economics Society, vol. 27(2), pages 196-222.
    3. Ronicle, David, 2022. "Turning in the widening gyre: monetary and fiscal policy in interwar Britain," Bank of England working papers 968, Bank of England.
    4. Jason Lennard & Meredith M. Paker, 2023. "Devaluation, Exports, and Recovery from the Great Depression," Discussion Papers 2403, Centre for Macroeconomics (CFM).
    5. Kent Matthews & Kian Ong, 2022. "Is inflation caused by deteriorating inflation expectations or excessive monetary growth?," Economic Affairs, Wiley Blackwell, vol. 42(2), pages 259-274, June.

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    More about this item

    Keywords

    Great depression; inflation; expectations; interwar Britain; regime change; Great Depression; inflation expectations; Wiley deal;
    All these keywords.

    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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