Ireland and Switzerland: The jagged edges of the Great Inflation

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Ireland and Switzerland: The jagged edges of the Great Inflation

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Nelson, Edward

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Edward Nelson

Abstract

Ireland and Switzerland both had rising inflation during the early 1970s, but their experiences diverged thereafter, so that they form a rare example of two countries whose inflation rates are poorly correlated with one another over the Great Inflation period. This paper proposes that the monetary policy neglect hypothesis can account for both countries' experiences. Extensive archival evidence is considered for each country regarding the doctrines that guided 1970s policymaking. This evidence establishes that Switzerland's better record is accounted for by the competition between monetary and nonmonetary views of inflation being resolved earlier and more decisively in favor of the monetary view. In Ireland, by contrast, nonmonetary views of inflation dominated policymaking throughout the 1970s.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 52 (2008)
Issue (Month): 4 (May)
Pages: 700-732
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Handle: RePEc:eee:eecrev:v:52:y:2008:i:4:p:700-732

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Paper
- Edward Nelson, 2006. "Ireland and Switzerland: the jagged edges of the Great Inflation," Working Papers 2006-016, Federal Reserve Bank of St. Louis. [Downloadable!]

References listed on IDEAS
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