Inflation and the Standard of Living

Abstract

If it was decided that the parity had to be reduced by about 25% to enable Britain to hold its own in the world, growing at least as fast as the world average, and with full employment again, what effect would such a policy have on the rate of inflation in Britain? What would it do to the standard of living? Are the monetarists right in saying that any additional margin of competitiveness achieved by depreciation would necessarily be lost very quickly as extra inflation rapidly worked its way through the economic system to bring Britain back to the status quo ante in competitive terms?