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Modelling UK inflation, 1875–1991
Author(s) -
Hendry David F.
Publication year - 2001
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.615
Subject(s) - economics , inflation (cosmology) , commodity , exchange rate , monetary economics , sample (material) , foreign exchange , macroeconomics , finance , chemistry , physics , chromatography , theoretical physics
UK inflation has varied greatly in response to many economic policy and exchange‐rate regime shifts, two world wars and two oil crises, as well as legislative and technological changes. Inflation is modelled as responding to excess demands from all sectors of the economy: goods and services, factors of production, money, financial assets, foreign exchange, and government deficits. Equilibrium‐correction terms are developed for each of these over the sample. Indicator variables and commodity prices capture turbulent years. Variables representative of most theories of inflation matter empirically, yielding an eclectic model inconsistent with any ‘single‐cause’ explanation. Copyright © 2001 John Wiley & Sons, Ltd.