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Perhaps the FOMC Did What It Said It Did: An Alternative Interpretation of the Great Inflation

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Author Info
Sharon Kozicki
P.A. Tinsley

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Abstract

This paper uses real-time briefing forecasts prepared for the Federal Open Market Committee (FOMC) to provide estimates of historical changes in the design of U.S. monetary policy and in the implied central-bank target for inflation. Empirical results support a description of policy with an effective inflation target of roughly 7 percent in the 1970s. Moreover, the evidence suggests that mismeasurement of the degree of economic slack was largely irrelevant for explaining the Great Inflation while favouring a passive-policy description of monetary policy. FOMC transcripts provide a neglected interpretation of the source of passive policy--intermediate targeting of monetary aggregates.

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File URL: http://www.bankofcanada.ca/en/res/wp/2007/wp07-19.pdf
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Paper provided by Bank of Canada in its series Working Papers with number 07-19.

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Length: 45 pages
Date of creation: 2007
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Handle: RePEc:bca:bocawp:07-19

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Related research
Keywords: Central bank research; Monetary aggregates; Monetary policy implementation;

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
N1 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations

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References listed on IDEAS
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Full references

Cited by:
(explanations, 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.)

  1. Sharon Kozicki & Peter Tinsley, 2005. "Term structure transmission of monetary policy," Research Working Paper RWP 05-06, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  2. Sharon Kozicki & P. Tinsley, 2006. "Minding the Gap: Central Bank Estimates of the Unemployment Natural Rate," Computational Economics, Springer, vol. 27(2), pages 295-327, May. [Downloadable!] (restricted)
    Other versions:
  3. Pierre Siklos, 2007. "Revisiting the Coyne Affair: A Singular Event That Changed the Course of Canadian Monetary History," Working Papers eg0047, Wilfrid Laurier University, Department of Economics, revised 2007. [Downloadable!]
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