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Measuring Inflation Expectations in Interwar Britain

Author

Listed:
  • Jason Lennard
  • Finn Meinecke
  • Solomos Solomou

Abstract

What caused the recovery from the British Great Depression? A leading explanation - the “expectations channel” - suggests that a shift in expected inflation lowered real interest rates and stimulated consumption and investment. However, few studies have measured, or tested the economic consequences of, inflation expectations. In this paper, we collect high-frequency information from primary and secondary sources to measure expected inflation in the United Kingdom between the wars. A VAR model suggests that inflation expectations were an important source of the early stages of economic recovery in interwar Britain.

Suggested Citation

  • Jason Lennard & Finn Meinecke & Solomos Solomou, 2021. "Measuring Inflation Expectations in Interwar Britain," CESifo Working Paper Series 9425, CESifo.
    • Handle: RePEc:ces:ceswps:_9425
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    References listed on IDEAS

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    Cited by:

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    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. Jason Lennard & Meredith M. Paker, 2023. "Devaluation, Exports, and Recovery from the Great Depression," Discussion Papers 2403, Centre for Macroeconomics (CFM).
    4. 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.
    5. Ronicle, David, 2022. "Turning in the widening gyre: monetary and fiscal policy in interwar Britain," Bank of England working papers 968, Bank of England.

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    More about this item

    Keywords

    policy regime change; economic history; Great Depression;
    All these keywords.

    JEL classification:

    • 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
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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