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The 1971-1974 Controls Program and The Price Level: An Econometric Post-Mortem

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Author Info
Alan S. Blinder
William J. Newton

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Abstract

This paper provides new empirical evidence on the effects of the Nixon wage—price controls on the price level. The major new wrinkle is that the controls are treated as a quantitative (rather than just a qualitative) phenomenon through the use of a specially-constructed series indicating the fraction of the economy that was controlled. According to the estimates, by February 1974controls had lowered the non-food non-energy price level by 3—4 percent. After that point, and especially after controls ended in April 1974, a period of rapid 'catch up' inflation eroded the gains that had been achieved, leaving the price level from zero to 2 percent below what it would have been in the absence of controls. The dismantling of controls can thus account for most of the burst of 'double digit' inflation in non-food and non-energy prices during 1974.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0279.

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Date of creation: Oct 1981
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Handle: RePEc:nbr:nberwo:0279

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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. Darby, Michael R., 1976. "Price and wage controls: The first two years," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 235-263, January. [Downloadable!] (restricted)
  2. Feige, Edgar L. & Pearce, Douglas K., 1976. "Inflation and incomes policy: An application of time series models," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 273-302, January. [Downloadable!] (restricted)
  3. Carlson, John A, 1977. "Short-Term Interest Rates as Predictors of Inflation: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 469-75, June.
  4. McGuire, Timothy W., 1976. "On estimating the effects of controls," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 115-156, January. [Downloadable!] (restricted)
  5. Lipsey, R G & Parkin, J M, 1970. "Incomes Policy: A Re-appraisal," Economica, London School of Economics and Political Science, vol. 37(146), pages 115-38, May. [Downloadable!] (restricted)
  6. Joines, Douglas, 1977. "Short-Term Interest Rates as Predictors of Inflation: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 476-77, June. [Downloadable!] (restricted)
  7. Robert J. Gordon, 1975. "The Impact of Aggregate Demand on Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1975-3), pages 613-670. [Downloadable!]
  8. Robert J. Gordon, 1973. "The Responses of Wages and Prices to the First Two Years of Controls," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1973-3), pages 765-780. [Downloadable!]
  9. Oi, Walter Y., 1976. "On measuring the impact of wage-price controls: A critical appraisal," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 2(1), pages 7-64, January. [Downloadable!] (restricted)
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(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. Alan S. Blinder & Jeremy B. Rudd, 2008. "The Supply-Shock Explanation of the Great Stagflation Revisited," NBER Working Papers 14563, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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