Abstract
1979 marked a watershed in UK macroeconomic policy. For many policy-makers, the stagflation of the early 1970s had discredited Keynesian macroeconomic policy with its emphasis on the simple Phillips curve and the putative trade-off between unemployment and inflation. Repeated attempts to curb inflation by incomes policies had proved a costly failure. The result was industrial unrest culminating in the 1979 ‘winter of discontent’ that cost the Labour government the election in that year. Consequently, on coming to power, the Thatcher government was determined to try a new approach and found it in its radical ‘monetarist experiment’, implemented through the Medium Term Financial Strategy (MTFS).1; This was the explicit targeting of initially the broad money supply, sterling M3 (£M3), by using both the nominal interest rate and the public sector borrowing requirement (PSBR). At this time, control of the money supply also became the macroeconomic policy in the United States.
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McCombie, J. (2010). The Thatcher Monetarist Experiment, 1979–85: An Assessment. In: Fontana, G., McCombie, J., Sawyer, M. (eds) Macroeconomics, Finance and Money. Palgrave Macmillan, London. https://doi.org/10.1057/9780230285583_7
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