IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

The Great Inflation of the Seventies: What Really Happened?

Listed author(s):
  • Nelson Edward

    ()

    (Federal Reserve Bank of St. Louis)

This paper revisits the issue of what factors produced the macroeconomic policies that led to the Great Inflation of the 1970s. I emphasize that a satisfactory explanation should satisfy two important criteria. First, it must be consistent with the record of views on the economy, manifested in statements by policymakers and prominent financial commentators. Second, it should work for countries beside the United States. I show that the monetary policy neglect hypothesiswhich claims that policymakers took a nonmonetary view of the inflation processmeets these criteria. Other explanations of the Great Inflation are ruled out, with one exception (the output gap mismeasurement hypothesis), which supplements the monetary policy neglect hypothesis. The study covers the Great Inflation in both the United Kingdom and the United States, with policymakers views on the economy documented using 1970s news reports.

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: https://www.degruyter.com/view/j/bejm.2005.5.1/bejm.2005.5.1.1297/bejm.2005.5.1.1297.xml?format=INT
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 5 (2005)
Issue (Month): 1 (July)
Pages: 1-50

as
in new window

Handle: RePEc:bpj:bejmac:v:advances.5:y:2005:i:1:n:3
Contact details of provider: Web page: https://www.degruyter.com

Order Information: Web: https://www.degruyter.com/view/j/bejm

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. Orphanides, Athanasios, 2004. "Monetary Policy Rules, Macroeconomic Stability, and Inflation: A View from the Trenches," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 151-175, April.
  2. Lawrence J. Christiano & Christopher J. Gust, 2000. "The Expectations Trap Hypothesis," NBER Working Papers 7809, National Bureau of Economic Research, Inc.
  3. David Laidler, 2003. "The role of the history of economic thought in modern macroeconomics," Chapters, in: Monetary History, Exchange Rates and Financial Markets, chapter 1 Edward Elgar Publishing.
  4. Athanasios Orphanides & John Williams, 2004. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Chapters, in: The Inflation-Targeting Debate, pages 201-246 National Bureau of Economic Research, Inc.
  5. Orphanides, Athanasios & Williams, John C., 2004. "The decline of activist stabilization policy: Natural rate misperceptions, learning, and expectations," CFS Working Paper Series 2004/24, Center for Financial Studies (CFS).
  6. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
  7. Bennett McCallum, 1999. "Recent developments in monetary policy analysis: the roles of theory and evidence," Journal of Economic Methodology, Taylor & Francis Journals, vol. 6(2), pages 171-198.
  8. Orphanides, Athanasios, 1999. "The Quest for Prosperity Without Inflation," Working Paper Series 93, Sveriges Riksbank (Central Bank of Sweden).
  9. Chari, V. V. & Christiano, Lawrence J. & Eichenbaum, Martin, 1998. "Expectation Traps and Discretion," Journal of Economic Theory, Elsevier, vol. 81(2), pages 462-492, August.
  10. Thomas M. Humphrey, 1998. "Historical origins of the cost-push fallacy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 53-74.
  11. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, September.
  12. Laidler, David, 1989. "Dow and Saville's Critique of Monetary Policy--A Review Essay," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1147-1159, September.
  13. James B. Bullard & Stefano Eusepi, 2003. "Did the Great Inflation occur despite policymaker commitment to a Taylor rule?," FRB Atlanta Working Paper 2003-20, Federal Reserve Bank of Atlanta.
  14. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
  15. Michael R. Darby & James R. Lothian & Arthur E. Gandolfi & Anna J. Schwartz & Alan C. Stockman, 1983. "The International Transmission of Inflation," NBER Books, National Bureau of Economic Research, Inc, number darb83-1, September.
  16. Nelson, Edward & Nikolov, Kalin, 2002. "Monetary Policy and Stagflation in the UK," CEPR Discussion Papers 3458, C.E.P.R. Discussion Papers.
  17. Robert B. Barsky & Lutz Kilian, 2002. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 137-198 National Bureau of Economic Research, Inc.
  18. Beyer, Andreas & Farmer, Roger E. A., 2002. "Natural rate doubts," Working Paper Series 0121, European Central Bank.
  19. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
  20. Michael D. Bordo & Anna J. Schwartz, 1997. "Monetary Policy Regimes and Economic Performance: The Historical Record," NBER Working Papers 6201, National Bureau of Economic Research, Inc.
  21. Thomas J. Sargent & Noah Williams & Tao Zha, 2006. "The conquest of South American inflation," FRB Atlanta Working Paper 2006-20, Federal Reserve Bank of Atlanta.
  22. Batini, Nicoletta & Nelson, Edward, 2001. "The Lag from Monetary Policy Actions to Inflation: Friedman Revisited," International Finance, Wiley Blackwell, vol. 4(3), pages 381-400, Winter.
  23. 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.
  24. Kevin J. Lansing, 2000. "Learning about a shift in trend output: implications for monetary policy and inflation," Proceedings, Federal Reserve Bank of San Francisco.
  25. Dallas S. Batten, 1981. "Inflation: the cost-push myth," Review, Federal Reserve Bank of St. Louis, issue Jun, pages 20-27.
  26. Christina D. Romer & David H. Romer, 2002. "The Evolution of Economic Understanding and Postwar Stabilization Policy," NBER Working Papers 9274, National Bureau of Economic Research, Inc.
  27. Marc Giannoni & Michael Woodford, 2004. "Optimal Inflation-Targeting Rules," NBER Chapters, in: The Inflation-Targeting Debate, pages 93-172 National Bureau of Economic Research, Inc.
  28. Arthur F. Burns, 1973. "Letter on monetary policy," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 15-22.
  29. Robert L. Hetzel, 1998. "Arthur Burns and inflation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 21-44.
  30. Nelson, Edward, 2001. "What Does the UK's Monetary Policy and Inflation Experience Tell Us About the Transmission Mechanism?," CEPR Discussion Papers 3047, C.E.P.R. Discussion Papers.
  31. Arthur F. Burns, 1978. "Reflections of an Economic Policy Maker," Books, American Enterprise Institute, number 725136.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:advances.5:y:2005:i:1:n:3. 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: (Peter Golla)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.