Karl Brunner and U.K. Monetary Debate

69 Pages Posted: 6 Feb 2019 Last revised: 21 Feb 2019

See all articles by Edward Nelson

Edward Nelson

Board of Governors of the Federal Reserve System

Date Written: 2019-02-01

Abstract

Although he was based in the United States, leading monetarist Karl Brunner participated in debates in the United Kingdom on monetary analysis and policy from the 1960s to the 1980s. During the 1960s, his participation in the debates was limited to research papers, but in the 1970s, as monetarism attracted national attention, Brunner made contributions to U.K. media discussions. In the pre-1979 period, he was highly critical of the U.K. authorities’ nonmonetary approach to the analysis and control of inflation-an approach supported by leading U.K. Keynesians. In the early 1980s, Brunner had direct interaction with Prime Minister Margaret Thatcher on issues relating to monetary control and monetary strategy. He was unsuccessful in persuading her to use the monetary base-instead of a short-term interest rate-as the instrument for implementing monetary policy. However, following his interventions, the U.K. authorities during the 1980s assigned weight to the monetary b ase as an indicator and target of monetary policy. Brunner’s imprint on U.K. monetary policy has also been felt in the twenty-first century. Brunner’s analysis, with Allan Meltzer, of the monetary transmission mechanism helped provide the basis for the policy of quantitative easing followed by the Bank of England.

Keywords: Karl Brunner, U.K. monetary policy, Monetarism, Monetary base control, Transmission mechanism

JEL Classification: E51, E58, E52

Suggested Citation

Nelson, Edward, Karl Brunner and U.K. Monetary Debate (2019-02-01). FEDS Working Paper No. 2019-004. Available at SSRN: https://ssrn.com/abstract=3329762 or http://dx.doi.org/10.17016/FEDS.2019.004

Edward Nelson (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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