Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76327 
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper No. 981
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Unemployment in the United Kingdom has fallen from high European-style levels to US levels. I argue that the key reasons are the reform of monetary policy, in 1993 with the adoption of inflation targeting and in 1997 with the establishment of the independent Monetary Policy Committee, and second the decline of trade union power. I interpret the reform of monetary policy as an institutional change that reduced inflationary pressures in the face of falling unemployment. The decline of trade union power contributed to the control of wage inflation. The major continental economies failed to match UK performance because of institutional rigidities, despite low inflation expectations.
Document Type: 
Working Paper
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