We argue that the Great Inflation experienced by both the United Kingdom and the United States in the 1970s has an explanation valid for both countries. The explanation does not appeal to common shocks or to exchange rate linkages, but to the common doctrine underlying the systematic monetary policy choices in each country. The nonmonetary approach to inflation control that was already influential in the United Kingdom came to be adopted by the United States during the 1970s. We document our position by examining official policymaking doctrine in the United Kingdom and the United States in the 1970s, and by considering results from a structural macroeconomic model estimated using U.K. data.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14895.
Length: Date of creation: Apr 2009 Date of revision: Handle: RePEc:nbr:nberwo:14895
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Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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John H. Cochrane, 1999.
"A Frictionless View of U.S. Inflation,"
NBER Chapters,
in: NBER Macroeconomics Annual 1998, volume 13, pages 323-421
National Bureau of Economic Research, Inc.
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