An Overhaul of Doctrine: The Underpinning of UK Inflation Targeting: A Rejoinder
回应Ed Nelson关于1990-2000年代货币政策改善原因的观点，质疑其对旧教条中通胀预期与失业权衡的解读，并基于历史政策背景提出不同看法。
Ed Nelson claims that the main cause of the improvement in monetary policy during the 1990s and 2000s [until 2007?] was a ‘changed view of the transmission mechanism’, rather than ‘shifts in policy maker objectives or to changing views about the long‐run inflation/unemployment trade‐off’, (p. F334). I agree with most of his comments on the changing views about the transmission mechanism but I dispute his suggestions about contemporary ideas on the unemployment/inflation trade‐off. In particular, Nelson goes so far as to argue that in the ‘old doctrine’ there was ‘a unit weight on inflation expectations in the inflation equation’ (p. F340, also equation (2) on p. F336). Moreover he further claims that ‘In fact, it seems appropriate, conditional on their incorrect model [the ‘old doctrine’], to attribute rational expectations from that model to UK policy makers’, (p. F342, also see equation (6), on p. F343). On what does Nelson base his claims? He does so on the basis of five quotes, from George Brown in 1965 (p. F343), Ted Heath in 1969 (p. F352), Harold Wilson in 1972 and 1975 (p. F353) and Ken Berrill in 1974 (p. F356). Ken Berrill was, I believe, commenting on both the non‐linearity and the lack of stability of the Phillips curve. In particular his phrase ‘Then there is a large flat band’ is hardly consistent with a (medium or long‐run) vertical Phillips curve. Wilson and Heath both denied any inverse relationship between inflation and unemployment. Remember, however, that the underlying monetary regime was a pegged exchange rate, until the end of Bretton Woods, and thereafter a fragile exchange rate (1973–6). Harold Wilson struggled to prevent devaluation. In this context faster domestic inflation (than abroad) meant loss of competitiveness, balance of payments pressure, exchange rate weakness, and restrictive fiscal and monetary policies (the stop part of ‘stop/go’). Heath/Wilson were trying to get Trade Unions to moderate wage claims by threatening them with future unemployment, not because (rationally expected) future inflation entered the Phillips curve with a unit coefficient but because of the policy reaction to sterling weakness.