‘Keynesian’ and ‘Monetarist’ Indicators of the U.K. Economy

  • Gordon T. Pepper
  • Geoffrey E. Wood


There is a long-running dispute between ‘Keynesians’ and ‘monetarists’ as to what variable or set of variables best indicates the stance of the government’s macroeconomic policy. ‘Keynesians’ differ among themselves but would agree that fiscal policy is of predominant importance, and that its stance can be measured by some weighted version of the public-sector borrowing requirement, while ‘monetarists’, although also differing among themselves, would lay paramount stress on monetary policy and use the behaviour of one (or more) of the monetary aggregates as an indicator of the stance of that policy. Behind these two positions lie both theoretical differences and differences over empirical magnitudes. It is not our intention to survey those here; surveys already exist and there is in any case no conclusive view of either position which can be used as the basis of a survey. A survey of this area is inevitably a contentious rather than a synthesising exercise. None the less, we do attempt a partial synthesis. We attempt to show that a fully worked-out ‘Keynesian’ interpretation and a similarly thorough ‘monetarist’ interpretation of the stance of macroeconomic policy in the United Kingdom would be close to each other in their conclusions. The argument may be summarised by saying that, because of the nature of the money supply process in the United Kingdom, the conclusions of the two types of analysis are inevitably closely linked, and further, we shall argue that, irrespective of one’s theoretical position, the stance of macroeconomic policy in the United Kingdom is at the moment best indicated by the behaviour of the monetary aggregates.


Interest Rate Monetary Policy Current Account Fiscal Policy Money Supply 
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Copyright information

© Michael Allingham and M. L. Burstein 1976

Authors and Affiliations

  • Gordon T. Pepper
  • Geoffrey E. Wood

There are no affiliations available

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