The term "stagflation" was first coined during a period of inflation and unemployment in the United Kingdom. The United Kingdom experienced an outbreak of inflation in the 1960s and 1970s. On 17 November 1965,
"We now have the worst of both worlds—not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of "stagflation" situation. And history, in modern terms, is indeed being made."
In a Bank of England working papers series, article authors Edward Nelson and Kalin Nikolov (2002) examined causes and policy errors related to the Great Inflation in the United Kingdom in the 1970s, arguing that as inflation rose in the 1960s and 1970s, UK policy makers failed to recognize the primary role of monetary policy in controlling inflation. Instead, they attempted to use non-monetary policies and devices to respond to the economic crisis. Policy makers also made "inaccurate estimates of the degree of excess demand in the economy, [which] contributed significantly to the outbreak of inflation in the United Kingdom in the 1960s and 1970s.
Stagflation was not limited to the United Kingdom, however. Economists have shown that stagflation was prevalent among seven major economies from 1973 to 1982. After inflation rates began to fall in 1982, economists' focus shifted from the causes of stagflation to the "determinants of productivity growth and the effects of real wages on the demand for labor".