Advanced Search
MyIDEAS: Login

The Great Inflation: Did the Shadow Know Better?

Contents:

Author Info

  • William Poole
  • Robert H. Rasche
  • David C. Wheelock

Abstract

The Shadow Open Market Committee was formed in 1973 in response to rising inflation and the apparent unwillingness of U.S. policymakers to implement policies necessary to maintain price stability. This paper describes how the Committee’s policy views differed from those of most Federal Reserve officials and many academic economists at the time. The Shadow argued that price stability should be the primary goal of monetary policy and favored gradual adjustment of monetary growth to a rate consistent with price stability. This paper evaluates the Shadow’s policy rule in the context of the New Keynesian macroeconomic model of Clarida, Gali, and Gertler (1999). Simulations of the model suggest that the gradual stabilization of monetary growth favored by the Shadow would have lowered inflation with less impact on output growth and less variability in inflation or output than a one-time reduction in monetary growth. We conclude that the Shadow articulated a policy that would have outperformed the policies actually implemented by the Federal Reserve during the Great Inflation era.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w16910.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16910.

as in new window
Length:
Date of creation: Mar 2011
Date of revision:
Publication status: published as The Great Inflation: Did The Shadow Know Better? , William Poole, Robert H. Rasche, David C. Wheelock. in The Great Inflation: The Rebirth of Modern Central Banking , Bordo and Orphanides. 2013
Handle: RePEc:nbr:nberwo:16910

Note: ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Rasche, Robert H., 1987. "M1 -- Velocity and money-demand functions: Do stable relationships exist?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 9-88, January.
  2. Athanasios Orphanides, 2003. "Historical monetary policy analysis and the Taylor rule," Finance and Economics Discussion Series 2003-36, Board of Governors of the Federal Reserve System (U.S.).
  3. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  4. Dennis Hoffman & Robert H. Rasche, 1989. "Long-run Income and Interest Elasticities of Money Demand in the United States," NBER Working Papers 2949, National Bureau of Economic Research, Inc.
  5. Allan Meltzer, 2000. "The Shadow Open Market Committee: Origins and Operations," Journal of Financial Services Research, Springer, vol. 18(2), pages 119-128, December.
  6. Brimmer, Andrew F, 1972. "The Political Economy of Money: Evolution and Impact of Monetarism in the Federal Reserve System," American Economic Review, American Economic Association, vol. 62(2), pages 344-52, May.
  7. Lyle E. Gramley & Samuel B. Chase, Jr., 1965. "Time deposits in monetary analysis," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 1380-1406.
  8. R.W. Hafer & David C. Wheelock, 2003. "Darryl Francis and the making of monetary policy, 1966-1975," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 1-12.
  9. Charles Calomiris & David Wheelock, 1998. "Was the Great Depression a Watershed for American Monetary Policy?," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 23-66 National Bureau of Economic Research, Inc.
  10. Edward Nelson & Anna J. Schwartz, 2008. "The impact of Milton Friedman on modern monetary economics: setting the record straight on Paul Krugman’s 'Who Was Milton Friedman?," Working Papers 2007-048, Federal Reserve Bank of St. Louis.
  11. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
  12. David Laidler, 1980. "Monetarism: An Interpretation and Assessment," RBA Research Discussion Papers rdp8009, Reserve Bank of Australia.
  13. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  14. Michael D. Bordo & Claudia Goldin & Eugene N. White, 1998. "The Defining Moment: The Great Depression and the American Economy in the Twentieth Century," NBER Books, National Bureau of Economic Research, Inc, number bord98-1, May.
  15. Laidler, David, 1981. "Monetarism: An Interpretation and an Assessment," Economic Journal, Royal Economic Society, vol. 91(361), pages 1-28, March.
  16. William Poole, 1975. "Monetary Policy during the Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 123-140.
  17. Allan H. Meltzer, 1963. "The Demand for Money: The Evidence from the Time Series," Journal of Political Economy, University of Chicago Press, vol. 71, pages 219.
  18. Christina D. Romer & David H. Romer, 2002. "A Rehabilitation of Monetary Policy in the 1950's," American Economic Review, American Economic Association, vol. 92(2), pages 121-127, May.
  19. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  20. Richard G. Anderson & Robert H. Rasche, 2001. "The remarkable stability of monetary base velocity in the United States, 1919-1999," Working Papers 2001-008, Federal Reserve Bank of St. Louis.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Could the Shadow Open Market Committee have outperfomed the Fed?
    by Economic Logician in Economic Logic on 2011-05-10 13:51:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Matthias Neuenkirch & Pierre Siklos, 2011. "What’s in a Second Opinion? Shadowing the ECB and the Bank of England," MAGKS Papers on Economics 201131, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Economic Logic blog

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16910. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.