Modelling UK inflation over the long run

Working paper

UK inflation varied greatly over 1865-1990, in response to many policy and exchange-rate regimes, two world wars and oil crises, and major legislative, and technological changes. It 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, using indicator variables and commodity prices for special factors. Equilibrium-correction terms are developed for each of these. Variables representative of most theories of inflation mattered empirically over the sample, yielding an electric model which refutes any 'single cause' explanation

Authors: Hendry, D

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2000-05-01
• Paper number: 2
• Keywords: cointegration; inflation; structural breaks; dynamic modelling