Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Lag from Monetary Policy Actions to Inflation: Friedman Revisited

Contents:

Author Info

  • Batini, Nicoletta
  • Nelson, Edward

Abstract

This paper updates and extends Friedman's (1972) evidence on the lag between monetary policy actions and the response of inflation. Our evidence is based on UK and US data for the period 1953-2001 on money growth rates, inflation and interest rates, as well as annual data on money growth and inflation. We reaffirm Friedman's result that it takes over a year before monetary policy actions have their peak effect on inflation. This result has persisted despite numerous changes in monetary policy arrangements in both countries. Similarly, advances in information processing and in financial market sophistication do not appear to have substantially shortened the lag. The empirical evaluation of dynamic general equilibrium models needs to be extended to include an assessment of these models' ability to account for the monetary transmission lags found in the data. Copyright 2001 by Blackwell Publishers Ltd.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=infi&volume=4&issue=3&year=2001&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal International Finance.

Volume (Year): 4 (2001)
Issue (Month): 3 (Winter)
Pages: 381-400

as in new window
Handle: RePEc:bla:intfin:v:4:y:2001:i:3:p:381-400

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=1367-0271

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kenneth N. Kuttner, 2001. "Beyond Bipolar: A Three-Dimensional Assessment of Monetary Frameworks," Working Papers 52, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2002. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," NBER Working Papers 8850, National Bureau of Economic Research, Inc.
  3. McCallum, Bennett T., 1999. "An Interview With Robert E. Lucas, Jr," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 3(02), pages 278-291, June.
  4. Sbordone, Argia, 1998. "Prices and Unit Labor Costs: A New Test of Price Stickiness," Seminar Papers, Stockholm University, Institute for International Economic Studies 653, Stockholm University, Institute for International Economic Studies.
  5. Milton Friedman, 1961. "The Lag in Effect of Monetary Policy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 69, pages 447.
  6. Timothy Cogley & Thomas J. Sargent, 2002. "Evolving Post-World War II U.S. Inflation Dynamics," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 331-388 National Bureau of Economic Research, Inc.
  7. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  8. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  9. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
  10. Stefan Gerlach & Lars E.O. Svensson, 2000. "Money and Inflation in the Euro Area: A Case for Monetary Indicators?," NBER Working Papers 8025, National Bureau of Economic Research, Inc.
  11. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  12. John H. Cochrane, 1998. "A Frictionless View of U.S. Inflation," NBER Working Papers 6646, National Bureau of Economic Research, Inc.
  13. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999, Society for Computational Economics 1151, Society for Computational Economics.
  14. Christopher J. Erceg & Andrew T. Levin, 2001. "Imperfect credibility and inflation persistence," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2001-45, Board of Governors of the Federal Reserve System (U.S.).
  15. Friedman, Milton, 1972. "Have Monetary Policies Failed?," American Economic Review, American Economic Association, vol. 62(2), pages 11-18, May.
  16. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
  17. repec:cup:macdyn:v:3:y:1999:i:2:p:278-91 is not listed on IDEAS
  18. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
  19. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  20. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
  21. Rochelle M. Edge, 2000. "Time-to-build, time-to-plan, habit-persistence, and the liquidity effect," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 673, Board of Governors of the Federal Reserve System (U.S.).
  22. Friedman, Benjamin M & Kuttner, Kenneth N, 1992. "Money, Income, Prices, and Interest Rates," American Economic Review, American Economic Association, vol. 82(3), pages 472-92, June.
  23. Nelson, Edward, 2001. "What Does the UK's Monetary Policy and Inflation Experience Tell Us About the Transmission Mechanism?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3047, C.E.P.R. Discussion Papers.
  24. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," NBER Working Papers 5809, National Bureau of Economic Research, Inc.
  25. Bryan, Michael F. & Gavin, William T., 1994. "A different kind of money illusion: The case of long and variable lags," Journal of Policy Modeling, Elsevier, Elsevier, vol. 16(5), pages 529-540, October.
  26. Bennett T. McCallum, 1999. "Analysis of the Monetary Transmission Mechanism: Methodological Issues," NBER Working Papers 7395, National Bureau of Economic Research, Inc.
  27. Huffman, Wallace E & Lothian, James R, 1980. "Money in the United Kingdom, 1833-80," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 12(2), pages 155-74, May.
  28. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1, October.
  29. Richard G. Anderson & Robert H. Rasche, 2000. "The domestic adjusted monetary base," Working Papers, Federal Reserve Bank of St. Louis 2000-002, Federal Reserve Bank of St. Louis.
  30. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
  31. Laurence H. Meyer & Chris Varvares, 1981. "A comparison of the St. Louis Model and two variations: predictive performance and policy implications," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 13-25.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:intfin:v:4:y:2001:i:3:p:381-400. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.