MONETARY POLICY IN BRITAIN: SUCCESSES AND SHORTCOMINGS

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1 OXFORD REVIEW OF ECONOMIC POLICY,VOL.1.NO.1 MONETARY POLICY IN BRITAIN: SUCCESSES AND SHORTCOMINGS DAVID LAIDLER University of Western Ontario I. INTRODUCTION For the economist interested in policy, the easiest time is one in which those with whom he disagrees have the ear of the authorities. Economic and political life being what it is, opportunities to criticise are bound to present themselves regularly, and very few phrases are spoken or written with such pleasure as "I told you so". It is, however, possible to have too much of a good thing, and the successful critic of policy runs the danger of attracting an invitation to do better himself. Such was the fate of British monetarists when Mrs Thatcher came to power, and for them (or us if I am still regarded as a member of the group) the experience has been chastening. Though some of us did expect the implementation of a monetary strategy designed finally to bring the great inflation of the 1970s to an end to have significant adverse side effects on real income and employment, none of us expected the deep and prolonged depression that ensued. 1 II. MONETARY CONTROL : ACHIEVEMENT AND FAILURE Though I shall argue in due course that the implementation of macro-economic policy has been clumsy, that it was carried out in a difficult world environment, and that the last few years have revealed problems with the conventional monetarist policy prescriptions of the 1970s, the first point to be made here is that the policy of the last five years has been far from an unqualified failure. Monetarism's most basic claim was that, in order to slow down inflation, money growth needed to be curbed. Over the last five years, on average, money growth has been more Though not quite as optimistic as the Committee perhaps suggested in its final report (see House of Commons (1981)), my evidence to the Treasury and Civil Service Committee in the summer of 1980 clearly underestimated the severity of the depression that was then in. the making, and overestimated its likely effect on the inflation rate. See Laidler (1980). 35

2 OXFORD REVIEW OF ECONOMIC POLICY,VOL.1.NO.1 restrictive than it was in the 1970s, and inflation has fallen markedly. This has not been simply a British phenomenon (and I shall discuss the behaviour of M3 in due course). The US, Canada and a number of European countries have generated similar evidence. Moreover, there can be little doubt that causation has run from tight money to lower inflation over the last few years. The possibility of "reverse causation" is certainly a problem in interpreting evidence on money-growth/inflation interaction in some historical episodes, but not in the early 1980s. In this limited but important respect, monetarism has fared much better than the "Keynesian" orthodoxy which preceded it as the dominant doctrine governing British macro policy. That orthodoxy did have it that inflation was a cost-push phenomenon which could be cured by demand led growth, and when policies based upon it were implemented in Britain (twice - by Macmillan and Maudling in and Heath and Barber in ) they did lead to balance of payments and inflation crises. 2 They also did so in the case of the more recent experiments of the Mitterand government in France. As David Cobham (1984) has recently argued, there is a new consensus emerging in British macroeconomics, and an important component of it is the understanding that demand side factors are of critical importance in determining the long-run behaviour of the inflation rate, and that the growth rate of monetary aggregates relative to the demand for them is, in this context, a key demand side factor. The phrase "relative to the demand " in the preceding sentence is important, because if monetarists have learned anything from the last five years in Britain it surely must be that the aggregate demand for money function is far from being the simple and stable relationship they once thought it to be. One important domestically generated cause of the severity of the British depression of the early 1980s was a monetary policy stance which was supposed to be gradualist, but was, in practice far from it. In part this was a matter of sheer clumsiness. It was not sensible to ignore the short-run cost-push effects of massive public sector wage increases and a large increase in VAT when deciding on money growth targets. Only a particularly naive version of monetarism in which markets clear and announced policy is always fully anticipated in private sector responses would have had it that these measures would merely affect relative prices even in the short run. And it was downright foolish to announce targets for M3 growth without taking account of the effects on the behaviour of that aggregate of the abolition of the "Corset" and the removal of exchange controls. 3 However, these were not the only reasons why monetary policy was inadvertently too tight in There was, with benefit of hindsight, a serious gap in the analysis which underlay its design. Though adamant that controlling money growth was the key to controlling inflation, monetarists prior to the 1980s paid little attention to the choice of the monetary aggregate in terms of which to implement their policies. Different people had different preferences here but there was agreement that the matter was of secondary importance. The consensus belief was that, if the growth rate of one aggregate was pinned down by policy, then that of others would be brought into line by the stable portfolio behaviour of the private sector and all would be well. Incredibly, we failed to notice that, although this proposition might be perfectly adequate to characterise steady states in which relative rates of return on various monetary assets were not changing, it was grossly inadequate as a guide for anyone seeking to change the long-run time path of monetary policy. Changes in the stance of monetary policy must affect interest rates, and given that some monetary assets bear interest at quite flexible market determined rates while others do not, the same portfolio behaviour which ensures that the demand for all monetary aggregates will grow stably in the steady state, also guarantees that their demands will grow at very different rates when policy is changing. In particular, the immediate response of the demand for a broad aggregate, whose marginal components bear interest at market rates, to a policy designed to lower its long-run growth rate, will be to grow more rapidly 2 3 I documented these views, and their relationship to the conduct of policy, in Laidler (1976). May I take this opportunity to make it quite clear that, whatever the anonymous author of the editorial abstract of Laidler (1982) may have thought I said in that paper, I did not say that the botched policy of was the result of a deliberate attempt on the part of the bureaucracy to undermine the government. 36

3 D Laidler until it has reached the new and higher equilibrium level that an increase in its own rate of return dictates. 4 Failure to take account of this effect on the demand for M3 during 1980, perhaps along with an underestimate of the amount of re-intermediation that followed the abolition of the corset, caused the rapid growth in M3 of that year to be taken as a signai that policy was not tight enough. Every other indicator, interest rates, the exchange rate, and the growth rates of narrower aggregates, were signalling that it was already too tight, but the authorities were slow to read their message and continued to tighten policy until the damage was done. We must be careful about the lessons which we draw for the future from this episode. It tells us that monetary aggregates are hard to interpret at turning points in policy, and not that they are unimportant variables for affecting aggregate demand. This in turn suggests that monetary weapons are ill-suited to short-run stabilisation policy, but then what monetarist ever said that they were? Monetarist policy prescriptions were, in the first place, designed for the maintenance of low inflation in an already low inflation environment, and it would be a grave mistake to infer from the experience of the early 1980s that, with inflation now substantially reduced, maintenance of low and stable money growth rates is irrelevant. On the contrary, it is the sine qua non of preserving the hard won gains against inflation of the last few years. III. DEMAND FOR MONEY DIFFICULTIES I make the above remark in full knowledge of the fact that the behaviour of M3 in 1980 is far from the only problem with the demand for money encountered in recent years. The rather simple econometric relationships of the 1950s and 1960s have not fared well in the face of evidence generated since the early seventies, either in the UK or elsewhere. There seem to have been two reasons for this. First, those relationships were all fitted on the assumption that observed behaviour reflected situations of equilibrium between the supply and demand for money in the economy as a whole. Such an assumption was probably adequate enough for the relatively tranquil 1950s and 1960s, but the instability of monetary policy during the 1970s surely undermined its usefulness for analysing those years. This suggestion, advanced a decade ago by Jonson (1976) and Artis and Lewis (1976) receives striking support from a recent (1984) study by the latter authors which also seems to show that, with the more stable monetary environment of the last few years, the problem in question is tending to disappear. Once again, the implication of all this is that monetary policy is not well suited to short-term stabilisation policy, and once again it is appropriate to note that such "fine tuning" is not what monetarists recommended in the first place. There is, though, another source of movement in the demand for money function which presents greater problems for monetarist analysis, and that is institutional change, sometimes autonomous, and sometimes as Goodhart's law stresses, in response to the conduct of policy. The fact of such change certainly means that traditional monetarist proposals to govern monetary policy by legislated growth rate rules for specifically defined aggregates are, to put it politely, unrealistic. However, it does not mean that one should be nihilistic about monetary policy. To say that institutional change will cause relationships based upon past experience to shift is one thing, but to say that the shifts in question are always unpredictable, cannot be monitored as they occur, and will not result in new and measurable stable relationships establishing themselves, is something else again. There is abundant evidence in favour of the first position, but very little to support the second. s Thus, though the case for rigid monetary rules has been destroyed by recent I suspect that our failure to foresee the importance of such behaviour before the event was the result of overgeneralising from United States monetary evidence. There, the prohibition of interest payments on demand deposits, and the fixing of a maximum rate to be paid on time deposits meant that the typical widely studied broad monetary aggregate, M2, behaved rather like the narrower M1 even at policy turning points. In institutional settings where market mechanisms have been left freer to work, e.g., in Britain and Canada, divergent behaviour of the growth rates of various aggregates as a result of portfolio substitution at policy turning points has been much more prevalent. A recognition of the importance of adjustment dynamics and institutional change for under- 37

4 OXFORD REVIEW OF ECONOMIC POLICY,VOL.1,NO.1 experience, that for setting and intelligently monitoring medium term (say two years) target ranges for money growth remains. This, of course, is what the authorities have been doing and are continuing to do, and, as I noted earlier, though the inflation rate has been reduced significantly since 1980, the cost of doing so has been much higher than anyone expected. The initial severity of the depression can be attributed to inadvertently tight money, but other factors have been at work too, particularly in causing it to persist for so long, and I shall now turn to a brief discussion of them, beginning with the international environment. IV. INTERNATIONAL INTERACTIONS It is well known that the basic work on the demand for money function, and the associated policy analysis stressing the desirability of putting money growth rates at the centre of things, was originally carried out in the United States, and that monetarist ideas were imported into the United Kingdom from the late 1960s onwards. Even more than now, the United States economy of twenty years ago could be treated as essentially closed to foreign influences, and American monetarism had to be adapted to the much more open British economy before it could successfully be applied here. Though it is not true, as Currie (1984) has recently suggested, that British monetarists were slow to realise the importance of making such an adaption, it is nevertheless the case that two elements of the post 1979 international situation were missing from our analysis. 6 To begin with, monetarist open-economy models of the 1970s were very much constant terms of trade devices. Hence they were not well adapted to help us understand the post 1979 situation in Britain when the second OPEC price increase was bound to put upward pressure on the exchange rate and created serious problems for the manufacturing sector. Analysis of such problems was available in the Australian literature (see for example Gregory (1976)) but its relevance to Britain was not widely understood in advance of the event. 7 The behaviour of the exchange rate in 1980, partly the result of oil, and partly the result of the inadvertently tight monetary policy to which I have already referred, was not anticipated, and ensured that the real burden of adjusting to anti-inflation policy was heavily concentrated in the traditional manufacturing sectors. The monetarist models of the 1970s were incomplete in another way too. They typically assumed that the behaviour of the rest of the world would remain stable during domestic policy experiments. Hence they yielded rather optimistic answers about the capacity of the domestic authorities to reduce inflation under a flexible exchange rate regime. They predicted, correctly, that a tightening of domestic policy would put upward pressure on the exchange rate; they translated this effect, however, into direct downward pressure on the inflation rate with, relative to a closed economy case, less tendency for income and employment to fall in the interim. Perhaps this second implication would have been largely borne out in the British case in the absence of the oil price effects already noted, and if the rest of the world economy had obligingly held equal all those foreign variables which the monetarist models held equal. However, if Britain was the first country to implement tight money in the 1980s she was far from the last, and the combined effects of monetary contraction in the world economy as a whole were, as Currie (1984) has correctly pointed out, far more severe than the policy makers of any individual country instanding the behaviour of the demand for money is another important factor singled out by Cobham (1984) as pointing towards a new convergence of opinion among British monetary economists. On this see also Goodhart (1983). It is worth pointing out that even Hendry and Ericsson (1983) in their extremely critical treatment of Friedman and Schwartz's (1982) Monetary Trends..., nevertheless show themselves quite willing to maintain the hypothesis that, in the long run, and subject to occasional and difficult to explain shifts, the demand for money is essentially proportional to real income and prices, and also varies systematically with the interest rates. Their disagreement with Friedman and Schwartz thus concerns the way in which the latter attempted to purge their data of the effects of short-run dynamics and the effects of institutional change, and not with the latter's basic hypothesis about the nature of the long-run demand for money function. 6 For British monetarist writings on open economy aspects of inflation see, for example, Laidler (1975), Ch. 10 (first published in 1972). Parkin (1974), or Ball and Burns (1976). 7 However, see Corden (1981) for an important exception. 38

5 D Laidler tended. The prolonged nature of Britain's depression is in part attributable to this, but only in part. Other problems have their origin closer to home, as I shall now argue. V. THE INTERDEPENDENCE OF MONETARY AND FISCAL POLICIES First of all, consider the methods used to control monetary growth over the last few years. Here, procedures favoured by monetarist economists have been consciously rejected by the authorities, probably with adverse consequences for the economy's performance. The procedures in question - known as "base control" (which ought not to be confused with base targeting) would have involved the authorities in manipulating the rate of growth of currency and deposits at the Bank of England - now known as MO - not for its own sake, but in order to achieve whatever targets might have been set for a broader aggregate. To make such a control method fully effective in the UK case, some institutional reform within the banking system would no doubt have been needed. I find it hard to believe that the current system of essentially zero reserve requirements would provide an adequate foundation for such methods to be reliable. 8 However, there are no obvious technical difficulties in the way of reintroducing reserve requirements into the system. They did, after all exist, on a conventional basis, before "Competition and Credit Control". Base control methods were rejected by the authorities not because their adoption would have required some institutional changes, but largely because, as a recent article by J S Fford (1983) makes clear, those authorities were concerned about the possibility that such methods would introduce extra volatility into the behaviour of interest rates. In an economy with a well-developed capital market, base control enables monetary policy to be carried out independently of the conduct of fiscal policy, in all but the very long run. That part of the public sector borrowing requirement which the banking system cannot cover within the limits laid down by monetary targets is met by borrowing from the private sector, at whatever interest rates are necessary to persuade the private sector to lend; but it is in this last phrase that the authorities' reasons for rejecting base control are to be found. They were not, as Fford makes quite clear, willing to surrender all powers over interest rates, and the adoption of base control would have implied that they did so. The upshot was that, in order to avoid "excessive" fluctuations in interest rates while still achieving money growth targets, it became necessary simultaneously to set targets for public sector borrowing. Thus did the British government throw away its ability to conduct monetary and fiscal policy independently of one another in a rather long short run, and' impose upon itself the same kind of constraints faced by governments of countries without' well-developed capital markets. Fiscal policy has thus been geared, not to achieving independent goals of its own, but to the pursuit of monetary targets, and, as we all know, it has been strongly procyclical as a result. All this may have been consistent with the government's plans to reduce the size of the public sector, but it was, and is, not a sensible way to conduct either fiscal or monetary policy. Monetarists have always opposed this subordination of fiscal policy to monetary requirements, as Milton Friedman's (1980) evidence to the Treasury and Civil Service Committee shows. That greater interest rate stability is inherent in current practices is dubious. Claims to this effect seem to be based on reasoning that might be appropriate to a closed economy, and overlook the fact that the capital market to which the British Government has access is international in scope. It is therefore hard to believe that variations in British public sector borrowing would have more than transitory and localised effects on real interest rates. Moreover, when private markets know that the authorities stand ready to iron out such fluctuations, they are deprived of the incentives necessary to develop the speculative practices which would themselves tend to stabilise rates in the face of short-term borrowing fluctuations. Thus the readiness of the authorities to intervene to stabilise interest rates tends to perpetuate the very market conditions under which such intervention seems to be necessary. It is important nevertheless not to oversell the benefits which could have been reaped in Britain over the last few years by deploying expansionary fiscal policies. The British economy is very open, and the Mundell (1963)-Fleming (1962) extension of conventional The detailed institutional framework governing the holding of reserves by the banking system seems to be critical to the use of base control techniques, as recent United States experience confirms. On this matter, see Bennett MacCallum (1985). 39

6 OXFORD REVIEW OF ECONOMIC POLICY, VOL.1.NO.1 Keynesian stabilisation analysis to the open economy case does tell us that, under flexible exchange rates, fiscal expansion will, by causing a currency appreciation, have its effects on income and employment completely offset by crowding out effects in the export and income competing sectors. Though it is dangerous to take the results of this rather old-fashioned analysis too literally, because it does hold some rather important variables, not least the price level and expectations of all variables, constant, the recent experience of the United States, where large fiscal deficits have certainly been associated with currency appreciation and grave difficulties for domestic industry, suggests that it does at least point to certain important tendencies at work in the real world. That being said, crowding out does seem to have been less than complete in the United States, and to be cautious about the extent of the benefits to be gained from fiscal expansion during a depression is not to argue that it would have no effects. Still less is it to argue that we should regard with equanimity a policy of contracting the government sector's contribution to aggregate demand at a time when the private sector's contribution is stagnant or even shrinking. In particular, at a time when the exchange rate is widely regarded as being "too low", so that exporters are therefore not tempted into expansion by its level, it is hard to believe that the upward pressure which extra government borrowing would put upon that variable if money growth remained on target would crowd out much private sector output. Thus, I find it impossible to avoid the conclusion that the monetary control methods adopted by the British authorities have placed unnecessary constraints upon fiscal policy to essentially no productive purpose, and that those constraints are having detrimental effects on policy at this juncture. The depression makes fiscal targets hard to meet, and every time they are overshot, downward pressure is put upon the exchange rate by markets that fear that monetary targets too will be violated. A policy strategy that emphasised the independence of fiscal and monetary policy would be less likely to cause such problems, and would also enable fiscal expansion to be designed with a view to having a maximum impact upon unemployment instead. VI. MICRO DEFICIENCIES Unnecessary interdependence between monetary and fiscal policy is not the only factor making for difficulties in Britain, though it is perhaps easier to remedy than the rigidity in labour markets which also bedevils the economy. The monetary cure for inflation is supposed to work, first, by putting downward pressure on aggregate demand which, though initially having its impact upon real quantities of output and employment, later results in a slowdown in inflation. In turn, that very slowdown, interacting with ongoing monetary growth, should imply that room is automatically created for income and employment to expand again. Ultimately, policy is supposed to reduce inflation and leave real variables largely unaffected. The first two phases of this sequence of events have certainly manifested themselves, but the third recovery phase, though more than once heralded, has been painfully slow to appear. In part this has been due to factors which I have already discussed, but in part it has been due to the simple fact that the British labour market is far from being the resilient mechanism that monetarist policies require for quick success. In the early years of the Thatcher government this lack of responsiveness was often attributed to deep seated expectations that policy would, in due course, take a "U-turn". 9 Plausible though this explanation might have seemed in , it has surely lost its power now, and yet the problem it was meant to explain remains. Closely related to the above explanation was one cast in terms of the obstructiveness of the Trade Unions. Miners' strike or no miners' strike, it nevertheless seems, to the outside observer, at least, that there is a much more realistic attitude among trade union leaders and members now than there was in the late 1970s. Though I would not wish to claim that Britain's trade union movement is ideally suited to coping with the rapidly changing economic environment of the later 1980s, I find it hard to pin all of the blame for a slow recovery on that movement. See, for example, Minford (1980) for analysis that relied heavily on expectations about the conduct of policy to determine its actual consequences, and treated expectations that policy might be reversed as an important factor affecting its outcome in

7 D Laidler Problems seem to me to lie rather deeper in the institutional framework than that, and in particular I would single out the nature of the British housing market as a major factor. 10 To rely upon owner occupation and local authority rentals to provide housing for close to 90% of the population is to accept a massive barrier to the geographical mobility of labour which, as the contrast between the relatively prosperous South and depressed North shows, the British economy so desperately needs if the current tentative recovery is to bear fruit. Both forms of housing tie with strong economic bonds members of the labour force to specific communities in specific areas. Into the bargain, they create a ready made and large constituency to support the very kind of "regional policies" which in the past have done so much to sap the British economy's vitality, and to support the kind of social safety net which some observers, notably Minford (1983), argue is overgenerous and makes its own, major, contribution to current unemployment. Whether Minford is right about this or not is beyond my expertise to judge. I would observe, however, that people who are unable to seek prosperity by moving because public policy ties them to specific areas can hardly be blamed if they seek that prosperity instead by voting for social assistance programmes. To rely on the labour market to work flexibly without providing for the underpinning of a large private rental sector in the housing market is to ask for trouble, but that is what British policy has done over the last five years. I am well aware of the political difficulties involved in regenerating a sector of the housing market that has been under ever more rigid controls since However, trade union reform is difficult but has been attempted; public expenditure cuts are difficult and have been attempted; and so on. In the housing field the government has contented itself with encouraging a switch from council tenancy to owner occupation, and with increasing tax subsidies to the latter form of tenure. 11 I cannot help but think that the relationships among housing policy, the functioning of the labour market, and indeed the grass roots political support for all manner of interventionist economic policies have not been appreciated by this government. It is high time that they were. VII. CONCLUSIONS The arguments which I have put in this essay are not all that original, but in matters of economic policy, originality is not necessarily a virtue. In any event, the arguments in question are easily summarised. The experience of the British economy over the last few years has been far from happy, and the reasons for that have been a mixture of bad luck (e.g., the 1979 oil shock and worldwide recession), avoidable policy errors (e.g., combining VAT increases and the removal of the "Corset" with monetary contraction; and tying fiscal policy to the pursuit of monetary targets instead of deploying it as an independent weapon of stabilisation policy) and errors stemming from gaps in underlying analysis (failing to appreciate the significance of portfolio shifts at policy turning points for the meaning of money growth indicators, and failing to recognise explicitly the need for labour market resilience if automatic mechanisms were to lead to real recovery 1 as inflation fell). However, and as I have also stressed, policy did have its predicted effect on inflation, and whatever one's views about whether that success was worth the price, one would presumably agree that the gain in question, having been made, is now worth consolidating. Policy prescription is always dangerous, but the argument of this paper does point to certain suggestions. First to consolidate gains against inflation, monetary growth rate targets should be maintained in place and kept modest. Whether such targets should be pursued within the European monetary system or outside it is not an issue that I have space to discuss here. Suffice it to say that policies in Europe are now sufficiently similar 10 Of course the "British disease" is far from being purely and simply a matter of the housing market. See Beckerman (1984) for a perceptive essay on some of the longer-term factors at work here. Nevertheless this issue is worth singling out as a particularly glaring source of labour market rigidity which is amenable to policy treatment. 11 It is worth noting explicitly that there is no inherent contradiction between encouraging owner occupation and the growth of a private rental sector. There are important life cycle elements in housing tenure choice, and, in North America at least, rental housing serves geographically mobile younger members of the labour force, many of whom become owner occupiers later in life. 41

8 OXFORD REVIEW OF ECONOMIC POLICY,VOL.1,NO.1 that the narrow macroeconomic case for staying out of the EMS is much weaker than it was. Second, monetary control techniques which free fiscal policy from the pursuit of monetary goals should be adopted so that fiscal policy may be geared to stimulating some real expansion. Unlike certain other countries - e.g., the United States and Canada - Britain's debt to national income ratio has if anything been falling in recent years - and the authorities do, as a result, have some room for manoeuvre on the fiscal front. Finally, and crucially, much more attention needs to be devoted to reforming the structure of the British labour market with a view to rendering it more flexible. At the moment macro policy is far from compatible with the micro environment. To attempt to solve this problem by changing macro policy would involve a return to the failed dirigisme of the 1970s. Thus I can see no real alternative to bringing the micro environment into line with macro policy.

9 D Laidler References Artis, M J and M K Lewis, (1976), The Demand for Money in the United Kingdom ", Manchester School, 44, Artis, M J and M K Lewis, (1984), "How Unstable is the Demand for Money in the United Kingdom?" Economica, 51, Ball, R J and T Burns, (1976), "The Inflationary Mechanism in the UK Economy", American Economic Review, 66, Beckerman, W (1984), "Economic Policy and Performance in Britain Since World War II", in A C Harberger (ed.). World Economic Growth, San Francisco, ICS Press. Cobham, D (1984), 'Convergence, Divergence and Realignment in British Macroeconomics", Banca Nazional del Lavoro Quarterly Review, 149, Corden, W M (1981), "The Exchange Rate, Monetary Policy and North Sea Oil: The Economic Theory of the Squeeze on Tradables", in W S Eltis, and P J N Sinclair (eds.), The Money Supply and the Exchange Rate, Oxford, The Clarendon Press. Currie, D (1984), "Macroeconomic Policy and Control Theory - A Failed Partnership", CEPR Discussion Paper 36. Fford, J S (1983), "Getting Monetary Objectives", Bank of England Quarterly Bulletin, 23 (June), Fleming, J M (1962), "Domestic Financial Policies under Fixed and Under Flexible Exchange Rates", IMF Staff Papers, 9, Friedman, M (1980), "Memorandum", in House of Commons, Treasury and Civil Service Committee Session , Memoranda on Monetary Policy, London, HMSO. Friedman, M and A J Schwartz, (1982), Monetary Trends in the United States and the United Kingdom, Chicago, University of Chicago Press. Goodhart, C A E (1983), "Disequilibrium Money - A Note", in Monetary Theory and Practice, London, Macmillan. Gregory, R G (1976), The Balance of Payments and Some Resource Allocation Issues", in Reserve Bank of Australia, Conference in Applied Economic Research: Papers and Proceedings, Sydney, R B A. Hendry, D F and N R Ericsson, (1983), "Assertion without Empirical Basis: An Econometric Appraisal of 'Monetary Trends'...The United Kingdom", in Bank of England Panel of Academic Consultants, Paper No 22, London, Bank of England. House of Commons (1981), Third Report from the Treasury and Civil Service Committee Session : Monetary Policy, Vol. I (Report), London, HMSO. Jonson, P D (1976), "Money Prices and Output: An Integrative Essay", Kredit and Kapital, 4, Laidler, D (1975), Essays on Money and Inflation, Manchester, Manchester University Press. Laidler, D (1976), "Inflation in Britain: A Monetarist Perspective", American Economic Review, 66, Laidler, D (1980), "Memorandum", in House of Commons, Treasury and Civil Service Committee, Session , Memoranda on Monetary Policy, London, HMSO. Laidler, D (1982), "Botched Monetarism", Journal of Economic Affairs, 2, McCallum B T (1985), "On Consequences and Criticisms of Monetary Targeting", Carnegie-Mellon University (mimeo). Minford, P (1980), "Memorandum", in House of Commons Treasury and Civil Service Committee, Session , Memoranda on Monetary Policy, London, HMSO. Minford, P (1983), Unemployment, Cause and Cure, Oxford, Martin Robertson. Mundell, R A (1963), "Capital Mobility and Stabilisation Policy Under Fixed and Flexible Exchange Rates", Canadian Journal of Economics and Political Science, 29, Parkin, J M (1974), "Inflation, the Balance of Payments, Domestic Credit Expansion, and Exchange Rate Adjustments", in R Z Aliber (ed.). National Monetary Policies and the International Financial System, Chicago, University of Chicago Press.