Extents and Limits of Monetary Reform under Gordon Brown

Abstract

International audienceGordon Brown’s first and main policy when nominated Chancellor in 1997 was to reform the monetary framework. This consisted of three major changes dedicated to maintaining price stability. From 1997 to 2007, the new framework seemed efficient, with Britain keeping moderate but constant growth and limited inflation. But the financial and economic crisis which started in 2008 changed the rules. Taking account of the two-year time lag, the expansionist interest rate policy applied since December 2007 first managed to prevent disinflation, but then led to accelerating increase in prices. Moreover, between the second quarter of 2008 and the third quarter of 2009, Britain’s growth rate remained negative, even despite the huge quantitative easing measures which took over from conventional interest rate policy. This paper will first analyse the monetary framework reform. It will then question its value, knowing that it obviously failed to prevent the crisis and to rapidly cure the recessionary situation