U.K. Monetary Regimes and Macroeconomic Stylised Facts

We exploit the marked changes intervened in U.K. monetary arrangements since the metallic standards era to investigate continuity and changes across regimes in key macroeconomic stylised facts in the United Kingdom. Our main findings may be summarised as follows. (1) Historically, inflation persistence appears to have been the exception, rather than the rule, with inflation estimated to have been highly persistent only during the period between the floating of the pound, in June 1972, and the introduction of inflation targeting, in October 1992. Under inflation targeting, it exhibits some slight negative serial correlation. (2) We document a remarkable stability across regimes in the correlation between inflation and the rates of growth of both narrow and broad monetary aggregates at the very low frequencies, some instability at higher frequencies. (3) In line with Ball, Mankiw, and Romer (1988), evidence points towards a positive correlation, both across regimes and over time, between mean inflation and the steepness of the Phillips correlation. (4) The real wage was markedly counter-cyclical during the interwar era, while it has been, so far, strongly pro-cyclical under inflation targeting