Theory that long dolequeues can fortify thePound is off NIE radar

KEY Executive Departments don’t hold any policy documents on a controversial theory once used to justify allowing higher unemployment to keep inflation down and the Pound strong.
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20/11/12: First Minister Peter Robinson and deputy First Minister Martin McGuinness meet with Prime Minister David Cameron at Stormont Castle, Belfast, Northern Ireland on the day that the Prime Minister confirmed that the G8 summit is to be held in County Fermanagh in 2013. Picture: Michael CooperPRESS RELEASE NO FEE FOR REPRODUCTION

20/11/12: First Minister Peter Robinson and deputy First Minister Martin McGuinness meet with Prime Minister David Cameron at Stormont Castle, Belfast, Northern Ireland on the day that the Prime Minister confirmed that the G8 summit is to be held in County Fermanagh in 2013. Picture: Michael Cooper
PRESS RELEASE NO FEE FOR REPRODUCTION 20/11/12: First Minister Peter Robinson and deputy First Minister Martin McGuinness meet with Prime Minister David Cameron at Stormont Castle, Belfast, Northern Ireland on the day that the Prime Minister confirmed that the G8 summit is to be held in County Fermanagh in 2013. Picture: Michael Cooper

In the 1960s economist William Phillips’ theory that inflation falls as dole queus stretch, became fashionable. Bankers and economists used it to justify policies resulting in higher unemployment and lower inflation. But over the past fifty years his thesis has been shown to be flawed.

Great Britain, for example, in the early 1990s experienced both high inflation and high unemployment (stagflation). The Sentinel asked the Department of Finance and Personnel (DfP) and the Office of First Minister and Deputy First Minister (OFMDFM) if they held any “policy documents, research or position papers” on the Phillips curve.

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The paper also asked if they had any literature on related models such as Money Zero Maturity (MZM) and Non-Accelerating Inflation Rate of Unemployment (NAIRU).

Whilst NI’s tiny economy and labour market would have little effect on inflation in the UK, Londonderry in particular, has for decades suffered high levels of unemployment.

According to Phillips this would have helped - however marginally - keep inflation down and the Pound strong. Neither OFMDFM nor DfP hold any policy or research documents relating to the theories. Invest NI said: “The terms referred to within your request are theories which relate to the relationship between different economic variables at a macro level.

“Given their nature, these terms would not naturally be found within Invest NI internal policy and strategy etc.”

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It said a search of all its “policy documents, research or position papers” would probably cost too much precluding a Freedom of Information release under fees regulations.

In 1995 Australian academic Robert Leeson wrote: “The Treasury expansionists and most of the economic ‘irregulars’ located themselves on the upper portion of the Phillips curve where, it was thought, ongoing inflation could be traded-off for lower rates of unemplyment; the bankers, and their allies in Treasury, located themselves on the lower portion of the Phillips curve where, it was believed, higher rates of unemployment would purchase low if not zero inflation and a stronger currency.”