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

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  • Sharon Kozicki
  • P.A. Tinsley

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:bca:bocawp:07-19

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

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References

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Citations

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Cited by:
  1. Pierre L. Siklos, 2010. "Revisiting the Coyne Affair: a singular event that changed the course of Canadian monetary history," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 994-1015, August.
  2. Sharon Kozicki & P. Tinsley, 2006. "Minding the Gap: Central Bank Estimates of the Unemployment Natural Rate," Computational Economics, Society for Computational Economics, vol. 27(2), pages 295-327, May.
  3. Sharon Kozicki & P.A. Tinsley, 2007. "Term Structure Transmission of Monetary Policy," Working Papers 07-30, Bank of Canada.
  4. Olivier Coibion & Yuriy Gorodnichenko, 2010. "Monetary Policy, Trend Inflation and the Great Moderation:An Alternative Interpretation," Working Papers 94, Department of Economics, College of William and Mary.
  5. Kozicki, Sharon & Tinsley, P.A., 2009. "Perhaps the 1970s FOMC did what it said it did," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 842-855, September.

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