946 Monetary Policy, Beliefs, Unemployment and Inflation
- It also involved great uncertainty about the measurement of the growth rates of the three
measures of GDP at the time, though this plays no part in the analysis we give. - The argument at the time was that membership could reduce inflation at reduced unem-
ployment cost due to the credibility gains inherent in “tying one’s hands” – essentially
the benefits of importing anti-inflation credibility from a then low inflation central bank
(the Bundesbank). As unemployment rose to over 10% by 1992 and only reached its pre-
entry rate by 1997, it is not clear that, in practice, these benefits actually accrued to the
UK.
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